Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Must a taxpayer use the Bank of Canada annual average exchange rate to convert pension and investment income to Canadian dollars when preparing his T1 Personal Income Tax Return?
Position: Not necessarily.
Reasons: The taxpayer may use another rate (such as the actual exchange rate provided by the taxpayer's bank) if it is appropriate.
XXXXXXXXXX
August 8, 2007
Dear XXXXXXXXXX:
Thank you for your letter received on May 22, 2007, concerning the correct foreign exchange rate to use to convert your foreign income to Canadian dollars. I apologize for the delay in responding.
In your letter, you state that you have been told that the Canada Revenue Agency (CRA) requires you to use the Bank of Canada annual average exchange rate to convert your pension and investment income from American dollars to Canadian dollars when preparing your T1 Individual Income Tax and Benefit Return. You would like to know if you can use the exchange rate you received from your bank when you deposited your foreign pension and investment income cheques into your bank account in Canada.
There is nothing in the Income Tax Act or the CRA's published material that requires you to use the Bank of Canada annual average exchange rate to convert your pension and investment income to Canadian dollars. Page 14 of the 2006 General Income Tax and Benefit Guide indicates that you may use the exchange rate that was in effect on the day you received the foreign income. Interpretation Bulletin IT-270R3, Foreign Tax Credit, also indicates that investment income may be converted at the exchange rate that applied on the date it was received. Similarly, pension income may also be converted at that exchange rate. I am attaching a copy of these documents, for your reference.
However, if the amounts were paid at various times throughout the year, you may use the Bank of Canada annual average exchange rate as a convenience. These rates are posted on the CRA's Web site at www.cra.gc.ca/tax/individuals/faq/exchange_rate-e.html.
I trust that the above information is helpful.
Sincerely,
The Honourable Carol Skelton, P.C., M.P.
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