Functional currency

A corporation resident in Canada throughout the tax year can elect to report in a functional currency. A functional currency is the currency of a country other than Canada that is both:


Effective for tax years starting after 2019, it was recommended that the Japanese yen be included in the definition of qualifying currency. A comfort letter from the Department of Finance was published to this effect. If you elect to report in Japanese yen, attach a copy of the comfort letter when you file Form T1296, Election, or Revocation of an Election, to Report in a Functional Currency.

You can elect to report in a functional currency if you meet all the following conditions:

The election to report in a functional currency must be filed within the first 61 days of the tax year to which the election applies.


The exchange rate to be used when converting the amounts is specified in the definition of relevant spot rate in subsection 261(1) of the Income Tax Act. Use the Bank of Canada daily exchange rate, to 4 decimal places, of the particular day. If no rate is quoted, use the rate from the closest preceding day for which a rate is quoted.

For more information, see section 261 of the Income Tax Act and Income Tax Folio S5-F4-C1, Income Tax Reporting Currency.


For all questions pertaining to the results of a functional currency assessment or for general questions related to filing an election or functional currency return, contact Business Enquiries at 1-800-959-5525. Please tell us that your question pertains to functional currency so that we may address your question accurately.

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