Keeping Electronic Records

What is electronic record keeping?
What is eCommerce?
Requirements electronic record keeping eCommerce
Doing business on the Internet
Backing up electronic files
Requirements for backing up electronic files
What is imaging?
Requirements for an acceptable imaging program
Managing electronic records and images
Retention and disposal of electronic records
Business systems evaluation
Audit trails required for electronic records

What is electronic record keeping?
Keeping electronic records means using electronic business systems to create, process, store, maintain, and provide access to the financial records of a person.
These systems include, but are not limited to:
* custom and commercial accounting software;
* Point of Sale systems;
* Internet based electronic commerce (eCommerce) systems;
* electronic purchasing and restocking systems; and
* income tax and GST/HST returns preparation software.
* Electronic records may be stored on a computer, a network of computers, or computers held by third parties. They can also be stored on diskettes, CDs, DVDs, tapes, or cartridges.
The computers and other storage devices may be located on your premises or elsewhere if the business or other organization operates in a Local Area Network or a Wide Area Network environment. The electronic records may also be maintained on a computer file server or on server space that is outside the premises.
Your electronic records must meet the requirements for all records, as listed in Chapter 1.
 

What is eCommerce?
Electronic commerce (eCommerce) can be broadly defined as the delivery of information, products, services, or payments by computer (including the Internet), by telephone, or other electronic media.
It includes the many kinds of activities that are being conducted electronically. It is much more than the purchasing of goods and services electronically.
eCommerce includes any transaction using:
* the Internet;
* telephone and fax;
* television shopping;
* secure private computer networks through electronic data interchange (EDI);
* credit and debit cards;
* electronic banking and payment systems; and
* automated banking machines (ABM).
 

Requirements for electronic record keeping including eCommerce records
In addition to the "Requirements for records" in Chapter 1 you must ensure that:
* your electronic record keeping system has the capacity to capture, produce, and retain sufficient details to determine your tax obligations and entitlements;
* your computerized records are supported and maintained by a system capable of producing records that are accessible to CRA officials and readable by CRA software;
* you keep your records in an electronically readable format even if:
* you retain paper copies of your electronic records; and
* your original electronic source documents have been transferred to another medium such as microfilm or a scanned image;
* you maintain proper back-up records at all times and, preferably, store them at an off-site location within Canada;
* your electronic records are retained in an electronically accessible and readable format even if changes have taken place to your operating and/or electronic business system;
* if any of the electronic records that you are required to maintain are lost, destroyed, or damaged, you call us at 1-800-959-5525 to report this situation. In addition, you must recreate the files within a reasonable period of time; and
* if your records have been encrypted, they can be decrypted and produced in an accessible and electronically readable format to CRA officials.
Note
Accessible format means that the taxpayer must provide a copy of the electronic records in an electronically readable and useable format to CRA officials to permit them to access the electronic records. The CRA can process electronic records on most industry standard file formats. The records have to be produced for inspection, no matter where they are stored.
Electronically readable format means information supported by a system capable of producing accessible and useable copy. If requested by CRA officials, you must be able to decrypt or unlock password-protected records and provide us with a copy of your electronic records in a useable format.
Useable format means that the electronic records can be processed and analyzed with CRA software. The useable copy of the electronic records must be in a non-proprietary, commonly used data interchange format, which is compatible with software used by the CRA.
Non-proprietary, commonly used data interchange format means those formats that allow files to be used with various software. For information on the types of commonly used file formats, call us at 1-800-959-5525.
 

Doing business on the Internet
If you use the Internet to carry on your business, your requirements and responsibilities are the same as those of regular businesses or other organizations as listed in Chapter 1 and Chapter 2.
In addition, you are responsible for retaining additional information generated by Internet-based transactions. This information forms an important part of the audit trail and is relevant for tax purposes.
The information is generated either:
during transaction processing, for example, Web logs and emails used to confirm a sale or reservation; or
as a result of security measures to preserve the authenticity and integrity of the resultant record, for example, electronic signatures.
If your business or other organization operates on the Internet and utilizes the services of transaction managers, Application Service Providers (ASP), re-billers, and other agents, you are responsible for ensuring this information is available.
We suggest that you retain this information or copies of this information as part of your records as these third parties may not retain your records for the period required by the CRA.
 

Backing up electronic files
You should make backup copies of all your business information that has been recorded on rewritable media, such as computer hard disks, floppy disks, CDs, DVDs, tapes, and cartridges. This will ensure that you do not accidentally lose, delete, or erase this information. You should store the media containing the recorded information in an environment free from hazards that could affect the media. These hazards include magnetic fields, direct light, excessive moisture, and temperature extremes.
When you retain back up records in a different medium, you should follow the media manufacturer's suggested procedures. You should give particular attention to the suggested shelf life of the medium.
If you contract with an outside party for the retention of your electronic records, you are responsible for ensuring that they are available to CRA officials on request.
 

Requirements for backing up electronic files
When you retain backups of your electronic files, you have to ensure that the backed up data files can be restored in a format that will be accessible and useable by the CRA.
 

What is imaging?
Imaging means generating a readable reproduction of the original paper source document. The images can be produced by scanning the paper source documents to electronic files or by creating microfiche or microfilm.
Imaging a paper source document generally involves:
an accurate reproduction made with the intention of standing in place of the source document; interpreting the reproduction to ensure it provides the same information as the source document; and ensuring the reproduction is well defined and the significant details are not obscured by the limitations of the reproduction, for example, resolution, tonality, or hues.
 

Requirements for an acceptable imaging program
You must keep the original version of records. You may, however, produce an electronic image of a paper document, which then can be accepted as the original record provided you follow certain procedures. Imaging and microfilm (including microfiche) reproductions of books of original entry and source documents have to be produced, controlled, and maintained according to the latest national standard of Canada.
Businesses using commercial software for smaller scale electronic scanning of their paper records and supporting documents should ensure that their scanned records meet the rules and guidelines set out in the latest national standard of Canada.
You can destroy paper books of account and source documents if they have been imaged in accordance with the above CGSB publication. These images become the permanent records. If you have any doubt, obtain legal advice first.
If businesses cannot meet the Canadian General Standards, they must keep their original records.
The standards are available to view at selected libraries in Canada. The standards are also available for purchase from the CGSB:
By mail:
Sales Centre
Canadian General Standards Board
Gatineau QC K1A 1G6
In person:
Place du Portage Phase 3, 6B1
11 Laurier Street
Gatineau, Quebec
By Internet:
http://www.pwgsc.gc.ca/cgsb/home/estore-e.html
By telephone, fax, or e-mail:
National Capital Region: 819-956-0425
Rest of Canada: 1-800-665-2472
Fax: 819-956-5644
E-mail: ncr.cgsb-ongc@pwgsc.gc.ca
 

Managing electronic records and images
When original source documents and records are created and maintained in electronic format, they must be kept in an electronically readable format. To ensure record availability, the original systems records, reports, and images of the reports generated also must be maintained for the required time period, usually six years.
This also applies to situations where the original records and source documents were subsequently transferred to another medium such as electronically scanned images.
Electronic records, required to assist you in fulfilling your tax obligations and to calculate your entitlements, should be consistent with the principles outlined in the Canadian General Standards.
To ensure the reliability, integrity and authenticity of your electronic records, consult the national standard publication, CAN/CGSB 72.34, Electronic Records as Documentary Evidence. It will outline electronic record management policies, procedures, practices and documentation that will assist you in establishing the legal validity of your electronic records.
 

Retention and disposal of electronic records
You must retain your electronic books, records, and images in electronically readable format for the same periods given in Chapter 1 under "How long do you need to keep your records?" and "Destroying records early."
 

Business systems evaluation
The CRA may undertake a review of your business systems to:
* ensure the systems meet the CRA record keeping requirements outlined earlier;
* get an overview of the system; this includes configuration options and details of the flow of information through the system and subsystems;
* evaluate the retention and content of electronic data files;
* evaluate the reliability of internal controls; and
* identify the electronic data files that will be required for subsequent audits.
* As part of your obligation to provide reasonable assistance to the CRA, you must, on request, provide information on your business systems.
 

Audit trails required for electronic records
An audit trail is the information that is required to recreate a sequence of events related to a business transaction. The electronic records must show an audit trail from the source documents, whether paper or electronic, to the summarized financial accounts.