CRA indicates that taxpayers can translate under s. 126 foreign taxes at the exchange rate applied to the related income

CRA indicated that for purposes of claiming the foreign tax credit under s. 126 in situations where the foreign tax is paid at a different time than the income arose, the foreign tax can be translated into Canadian dollars on the date of payment of the foreign tax or, alternatively, through use of the same relevant spot rate as was used for the conversion of the foreign income itself: either method is acceptable as long as it is used consistently from one year to another.

CRA also indicated that the Canada-U.S. or Canada-U.K. Treaty does not eliminate the requirement that the amount of the foreign tax needs to be paid in order to be eligible for the foreign tax credit.

Neal Armstrong. Summaries of 3 December 2019 CTF Roundtable, Q.2 under s. 126(1) and Treaties – Income Tax Conventions – Art. 24.