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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.

Note that in kind transfers may not be on the T5008 or Trading Summary (this may have changed in 2020), but 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.

The T5008 produced by TD used to show US$ account trades in US$.  In 2020 US$ account trades are being reported by TD in Cdn$, using the trade date exchange rate (which is what we also use).  It's been reported to us that some brokerages are still leaving the amounts in US$.  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.  You cannot use the average rate for purchases and disposals.

Investment income is reported on Schedule 4 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.

2020 US Exchange Average Rate

The annual average rate for converting US dollars for 2020, as per the Bank of Canada, was 1.3415 (1.3269 for 2019).  To convert US dollar income/dividend amounts to Canadian dollars for 2020, multiply the US$ amount by 1.3415.  

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

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: October 15, 2021

 

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