Functional currency

Important notice

The exchange rate to be used when converting amounts for functional currency purposes is specified in the definition of “relevant spot rate” in subsection 261(1) of the Income Tax Act. This definition is modified, so that as of March 1, 2017, you have to use the new daily exchange rate that the Bank of Canada publishes per currency pair at 16:30 eastern time on the particular day. If the particular day is before March 1, 2017, use the noon rate.

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:

  • the primary currency in which the corporation keeps its records and books of account for financial reporting purposes for the tax year
  • a qualifying currency (currently the U.S. dollar, the Australian dollar, the British pound, and the euro)

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

  • the corporation is not an investment corporation, a mortgage investment corporation, or a mutual fund corporation
  • there is a functional currency for the first tax year to which the election, Form T1296, applies
  • you have not filed or revoked a previous election to report in a functional currency
  • you file the election on time

For tax years that begin after July 12, 2013, 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. If the tax year started before July 13, 2013, the election had to be filed at least six months before the end of the tax year to which the election applies.

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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