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Reporting Foreign Transactions TaxTips.ca
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Filing Your Return  ->  Stocks and Bonds  ->  Small Business Income Tax  -> Reporting Foreign Transactions

Reporting Foreign Transactions

When foreign amounts, including purchases and sales, income, expenses, and foreign taxes paid, are reported on your Canadian personal or corporate income tax return, they must be reported in Canadian dollars.

Sales of investments are reported on Schedule 3 of the personal tax return, in Canadian dollars.  The adjusted cost base (ACB) of the sold investment is also recorded in Canadian dollars, using the exchange rate from the date the investment was purchased.  If you have non-registered investments held in US$, it's very important to keep accurate records of the date the investments were purchased, and the exchange rate on that date, to calculate your Canadian dollar ACB.  Your US$ brokerage statements will show you the US$ ACB of your investments, but will not show you the Cdn$ ACB.  The T5008 and Trading Summary provided by your brokerage will show the US$ proceeds and cost, but you must convert these amounts to Cdn$ using the exchange rate from the sale and purchase dates.  Note that the T5008 proceeds may not be net of commission (commission may be shown separately), but the Trading Summary shows the net proceeds after commission is deducted.

Deemed Dispositions and the T5008

Note that in kind transfers may not be on the T5008 or Trading Summary, because they are not required to be reported, but they must be reported as a disposal on your Schedule 3 if the transfer was to your registered account, or to someone else's account.  If you use a professional tax preparer, you must provide this information to them.  Also, note that the T5008 proceeds are before any commission is deducted.  Your trading summary will show the proceeds net of commission.

T5008 Exchange Rates

The T5008 produced by TD Direct Investing:

bulletShows the currency used (USD or CAD) in the top right-hand corner.
bulletPrior to 2020, showed US$ account trades in US$, and did not show in kind transfers
bulletShows the proceeds of disposition before deducting commission.
bullet In 2020 reported US$ account trades in Cdn$ - but this was only for in kind transfers that went through the US$ account, and they were shown on the T5008 for the Cdn$ account.
bulletusing the exchange rate for the date of the sale (which is what we also use) for the proceeds of disposition.
bulletusing the same exchange rate for the adjusted cost basis as for the sale - this is not the correct Cdn$ ACB, so you'll have to calculate the ACB in Canadian $ yourself, using the trade date of the purchase of the investment.
bulletIn 2021 reported US$ account trades in US$, even in kind transfers, but did not include all US$ in kind dispositions.  2 of the US$ in kind dispositions were reported on the Cdn$ T5008, in Cdn$, with an incorrect Cdn$ ACB.  Note that your T5008 states that box 20 "may or may not reflect your adjusted cost base (ACB) for the purpose of determining the gain or loss from the disposition of the security."

It is quite likely that your T5008 for trades in a US$ account will be in US$.  The point of this is that you must check your T5008, make sure you know the currency it is using, and make sure it includes all dispositions.  You will have to do the calculation to convert US$ ACBs to Cdn$ yourself.

The Income Tax Act says to use the exchange rate in effect on the date of the transaction, for converting to Cdn$.  If you happen to use the settlement date rate instead of the trade date rate, you should be consistent in doing this for all purchases and disposals in every year.

Tax Tips:

You cannot use the average annual exchange rate for purchases and disposals.

A T5008 which shows US$ amounts in Cdn$ will probably not have the correct Cdn$ ACB for US$ investments.

Always check the T5008 proceeds and ACB to your own records!!

Line 12100 Investment Income

Investment income is reported on Line 12100 (line 121 prior to 2019) of the personal tax return.  If you are using a software package to do your tax return, record the information from your tax slips in the tax slips area of the return.  The amounts on your tax slip may not be in Canadian dollars.  If they are not, you have to convert the amounts and enter the Canadian dollar amounts into the tax return.

When you record the amounts from your tax slips using personal income tax software, any foreign withholding tax will automatically be entered into the areas for calculating the federal and provincial foreign tax credits.  The federal foreign tax credit is calculated on Schedule T2209, and at least a portion of it should reduce your taxes payable.  The provincial or territorial foreign tax credit is calculated on Schedule T2036.  See the foreign tax credit article for how to deduct the amount not recovered by the foreign tax credit.

Converting Foreign Amounts to Canadian Dollars

The foreign exchange rate used to convert the foreign currency transaction into Canadian dollars is either

bullet the rate in effect on the date of the transaction, or
bullet the average annual exchange rate for the taxation year

as quoted by the Bank of Canada on the particular day or on the closest preceding day for which a spot rate is quoted, as per the definition of "relevant spot rate" in s. 261(1) of the Income Tax Act.

When assets, including investments, are purchased or sold, the exchange rate in effect on the date of the transaction should be used.  Dividends received throughout the year can be converted at either the transaction date rate or the average annual exchange rate for the taxation year, but the method used should be consistent from year to year.

If any income or expense that you have received or paid was converted to Canadian dollars as part of the transaction, then the Canadian dollar amount that you actually received or paid would be reported as your income or expense.  For example:

bulletIf you have paid tax-deductible expenses by using your credit card, which converts the amounts into Canadian dollars, you would use the Canadian $ amount that you actually paid.
bulletIf your foreign dividends are received in a Canadian $ account, so that they are converted automatically, the the amount you would report as a dividend is the Canadian $ amount that you actually received.

Using an Average Exchange Rate

As noted in paragraph 1.6.1 of Income Tax Folio S5-F4-C1, Income Tax Reporting Currency (link below), CRA may accept the use of an average of exchange rates over a period of time in order to convert certain income items.  Income items would include interest, dividends and other income items, but not capital purchases/sales of securities.

2021 US Exchange Average Rate

The annual average rate for converting US dollars for 2021, as per the Bank of Canada, was 1.2535 (1.3415 for 2020).  To convert US dollar income/dividend amounts to Canadian dollars for 2021, multiply the US$ amount by 1.2535.  

The exchange rates for years up to and including April 28, 2017 are now considered "legacy" rates by the Bank of Canada, and the noon, closing, monthly average and annual average rates can be downloaded from the Bank of Canada Historical Noon and Closing Rates.

See our table of historical US$ average annual exchange rates, which also provides links to exchange rate lookup sites.

Tax Tips:

Investment purchases and sales use transaction date rate.

Dividends can use average annual rate or transaction date rate - be consistent from year to year!

Your US$ brokerage statements will show you the US$ ACB of your investments, but will not show you the Cdn$ ACB.  That calculation is your responsibility.

In kind transfers out of your non-registered account may not be on the T5008 or Trading Summary, but must be reported on your Schedule 3.

Proceeds on T5008 might not be net of any commission paid, but if not, commission may be shown separately. The trading summary will have proceeds net of commission.  Always check to your own records to ensure you report the correct amounts.

Reporting Foreign Assets Owned

If you own foreign assets with a cost basis exceeding $100,000 Canadian at any time in the year, this must be reported on the T1135, foreign asset verification statement.  This form must be filed by Canadian resident individuals, corporations and trusts, as well as many partnerships.  See our article on Reporting Foreign Assets Owned on the T1135 Form.

TaxTips.ca Resources

What does the Income Tax Act say about the exchange rate?

Tax treatment of shares in foreign corporations

Foreign non-business income tax and foreign tax credit

Other Resources

Bank of Canada Exchange Rates

University of British Columbia Pacific Exchange Rate Service

Canada Revenue Agency (CRA) Resources

Income Tax Folio S5-F4-C1, Income Tax Reporting Currency

IT95R (Archived) - Foreign Exchange Gains and Losses

Tax Tip:  You may be able to recover some of the foreign tax paid, by claiming a foreign tax credit.

Revised: April 05, 2022

 

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