Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
TO:
XXXXX
XXXXX
XXXXX
FROM:
Bao Tran
Rulings Officer
Specialty Tax Unit
FIRP Division
GST/HST Rulings Directorate
CASE NUMBER:
117783
DATE:
January 19, 2010
SUBJECT:
GST/HST
Exchange Rates
Thank you for your XXXXX of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to goods/services invoiced in foreign currency. As your query deals with section 159 of the Excise Tax Act ("ETA"), it has been transferred to our unit for reply.
All legislative references are to the ETA unless otherwise specified.
Interpretation Requested
We understand that XXXXX, has raised the issue of what constitutes an acceptable foreign exchange rate for purposes of section 159. More specifically, XXXXX is suggesting that both "cash rates" and "nominal rates" of exchange quoted by the Bank of Canada are acceptable rates under GST/HST Policy Statement P-222.
Interpretation Given
Our view is that only the Bank of Canada's nominal rate of exchange is acceptable for purposes of section 159. Section 159 states as follows:
Where the consideration for a supply is expressed in a foreign currency, the value of the consideration shall, for the purposes of this Part, be computed on the basis of the value of that foreign currency in Canadian currency on the day the tax is payable, or on such other day as is acceptable to the Minister.
Policy Statement P-222 provides a list of acceptable sources for determining the foreign exchange rate for purposes of section 159, one being the "rate of exchange" from the Bank of Canada. As confirmed in XXXXX to you of XXXXX, the exchange rates for this purpose are described by the Bank of Canada as "nominal quotations" XXXXX .
However, reference is made to two different rates in the "currency converter" available on the Bank of Canada's website XXXXX , namely the "nominal rate" and the "cash rate". The website states the following regarding nominal rates:
XXXXX.
Regarding cash rates, the website advises that:
XXXXX.
This implies that the cash rate does not take into account any premiums that may be applied on an actual currency conversion, which would contradict the policy intent described in P-222. In this regard, the policy states that if a person must pay a premium to obtain foreign currency from a particular source for a particular foreign currency denominated transaction, any additional costs incurred associated with obtaining that rate must be included when translating the foreign currency into Canadian currency.
Based on the policy intent of P-222 it is our view that when a taxpayer wishes to use the Bank of Canada's rate of exchange to calculate the GST/HST payable on a transaction made in a foreign currency, the taxpayer is required to use the Bank of Canada's nominal exchange rate.
We trust that this will be of some assistance. If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-1433.
Yours truly,
Bao Tran
Specialty Tax Unit
FIRP Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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