CRA confirms the use of average monthly exchange rates in a GST/HST context

ETA s. 159 (which is quite truncated as compared to ITA s. 261) provides that the consideration for a supply expressed in a foreign currency shall be converted using the exchange rate on the day the tax became payable “or such other day as is acceptable to the Minister.” CRA has replaced P-222 by significantly more detailed commentary in Memorandum 3-6 on various FX issues.

In picking an FX rate, the registrant may use:

  • the day the consideration for the supply is paid
  • the day the foreign currency is acquired (as to which CRA provides a simplistic example of the day on which a money order for US$1,000 is acquired, with Canadian funds, to pay a USD invoice in that exact amount)
  • an average rate of exchange for the month in which the tax becomes payable (as to which CRA provides an example in which only two USD invoices were rendered in a month, showing that this method can be used even if it would be practicable to be more precise)

CRA provides a somewhat broad list of the acceptable sources for determining the exchange rate to use:

  • 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 (for example, if a US company regular exchanges currency with a local US bank, it can use that bank as its source of FX rates)
  • a Canadian chartered bank
  • the Bank of Canada
  • the CBSA rate used for purposes of converting the value for duty of imported goods

An example of an unacceptable source is a commercial database service. (Bloomberg is relied on by the banks and investment dealers, but CRA presumably would not want to pay the Bloomberg fees.)

Neal Armstrong. Summary of GST/HST Memorandum 3-6 Conversion of Foreign Currency July 2018 under ETA s. 159.