Conversion of Foreign Currency

GST/HST Memorandum 3-6
July 2018

This publication cancels and replaces the following publications: GST Memorandum 300-7-10, Foreign Currency, dated March 15, 1994, and GST/HST Policy Statement P-222, Acceptable Exchange Rate Sources for Converting the Value of Consideration Expressed in Foreign Currency to a Value in Canadian Currency for Purposes of Section 159 of the Excise Tax Act.

All legislative references in this publication are to the Excise Tax Act unless otherwise specified. The information in this publication does not replace the law found in the Act and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the Act or relevant regulation, or call GST/HST Rulings at 1-800-959-8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1-855-666-5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Table of Contents

• General rule
• When GST/HST is Payable
• Alternative days for conversion of foreign currency
  • Day consideration is paid
  • Day foreign currency acquired
  • Average exchange rate for the month in which the tax becomes payable in respect of the supply
• Acceptable exchange rate sources
• Administration

General rule

1.  Under section 159, where the consideration for a supply is expressed in a foreign currency, the value of the consideration shall, for GST/HST purposes, be calculated based on the value of that foreign currency in Canadian currency on:

• the day the GST/HST is payable; or
• such other day as is acceptable to the Minister.

When GST/HST is Payable

2. Generally, under subsection168(1), the GST/HST is payable by the recipient of a taxable supply on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due.

3. Under subsection 152(1), the consideration, or a part thereof, for a taxable supply is deemed to become due on the earliest of:

• the earlier of the day the supplier first issues an invoice in respect of the supply for that consideration or part and the date of that invoice;
• the day the supplier would have, but for an undue delay, issued an invoice in respect of the supply for that consideration or part; and
• the day the recipient is required to pay that consideration or part pursuant to an agreement in writing.

4. For additional information about when the GST/HST becomes due, refer to GST Memorandum 300-6, Time of Liability.

Alternative days for conversion of foreign currency

5. The following days are acceptable to the Minister for converting the value of the consideration for a supply into Canadian currency from a foreign currency:

• the day the consideration for the supply is paid
• the day the foreign currency is acquired

6. An average rate of exchange for the month in which the tax becomes payable can also be used.

7. Where a registrant uses a particular day for the conversion of foreign currency, as per paragraph 5 above, the registrant is to use the particular day consistently and for a reasonable period of time, such as one year.

8. A registrant with separate business lines may use different days for the conversion of foreign currency for the different business lines where circumstances merit such treatment with the approval of the Minister.

9. If the method chosen to convert foreign currency into Canadian currency results in the date of conversion occurring on a weekend or a holiday, the rate of exchange for the previous business day should be used.

Day consideration is paid

10. The value of the consideration in equivalent Canadian currency may be calculated on the day the payment in respect of a supply is paid to the supplier.

Day foreign currency acquired

11. The value of the consideration may be converted from foreign currency to the equivalent Canadian currency using the exchange rate in effect on the day the foreign currency was acquired.

Average exchange rate for the month in which the tax becomes payable in respect of the supply

12. The value of the consideration in equivalent Canadian currency may be calculated using the average rate of exchange for the month in which the tax becomes payable.

Acceptable exchange rate sources

13. To convert foreign currency into Canadian currency for GST/HST purposes, a person may use the exchange rate from:

• the source used for an actual conversion (that is, the source where the foreign currency was exchanged for Canadian dollars)
• the source the person typically uses for actual conversions
• a Canadian chartered bank
• the Bank of Canada
• the rate provided by the Canada Border Service Agency (CBSA) for purposes of converting the value for duty of imported goods (for additional information, refer to CBSA Memorandum D13-2-3, Exchange Rate for the Calculation of the Value for Duty under the Customs Act)

14. The use of a particular exchange rate source must be supported with appropriate documentation.

15. When an exchange rate source other than the source used for an actual transaction is selected, that source must be used consistently and for a reasonable period of time, such as one year.

Administration

16. If a premium is paid to obtain foreign currency for a particular foreign-currency‑denominated transaction, any additional costs associated with obtaining the foreign currency must be included when converting the foreign currency into Canadian currency.

17. Any method used to convert the value of consideration in foreign currency into Canadian currency, other than the use of the exchange rate in effect on the day the tax becomes payable and the methods listed in this memorandum, must be approved by the Minister prior to its application. Requests can be addressed to:

Excise and GST/HST Rulings Directorate
Canada Revenue Agency
320 Queen Street, Tower A, 11th floor
Ottawa ON  K1A 0L5

18. Suppliers may invoice in foreign currency and recipients may make payments to suppliers in foreign currency. However, foreign currency must be converted into Canadian currency using an approved method in order to determine the amount of tax for GST/HST reporting purposes.

19. The supplier and the recipient of the supply are not required to use the same method of conversion to determine the value of the consideration in Canadian currency.

20. Although the examples in this memorandum use US dollars, these methods are applicable for converting any foreign currency for GST/HST purposes.

21. Whatever method of conversion is used, sufficient documentary evidence must be maintained with respect to the exchange rate in effect on the date of conversion. Suppliers must also maintain sufficient documentation and books and records to support whatever method is used. The books and records are required to be in an appropriate form and must contain sufficient information to allow for the determination of the amount of GST/HST to be paid, collected, deducted, or refunded.

22. For further information on the requirements to retain books and records, refer to GST/HST Memorandum 15-1, General Requirements for Books and Records, and GST/HST Memorandum 15-2, Computerized Records.

Further information