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: 1) Eligibility to report in functional currency; 2) Audit procedures
Position: See response
Canadian Tax Foundation - 2009 Round Table
Functional Currency Tax Reporting
Assume that a United States (US) company owns all the shares of a Canadian holding company (Canco) which has no active business activities, but which, in turn, owns one or more Canadian operating subsidiaries. Canco maintains its accounting records in $US in accordance with Generally Accepted Accounting Principles. The Canadian operating subsidiaries are not $US reporting entities.
Questions
1) Is the fact that the $US is primary currency in which Canco maintains its records and books of account sufficient to elect pursuant to subsection 261(3)?
2) In the course of reviewing the eligibility requirements for electing under subsection 261(3), what procedures will the CRA perform? Will these procedures be different depending upon whether the company (or the ultimate parent of the company) is listed on a stock exchange or privately owned?
CRA Response
- A Canadian resident corporation (other than an investment corporation, a mortgage investment corporation or a mutual fund corporation) that is required under applicable financial reporting principles to maintain all of its records and books of account in $US should generally be eligible to elect to report its Canadian tax results in $US.
- The CRA may, in the course of an audit, review the eligibility requirements of a taxpayer to report its Canadian tax results in a qualifying currency. At this time, no specific procedures have been adopted to test a particular taxpayer's eligibility to report in a qualifying currency; however, any procedures that are adopted would be expected to apply equally to all corporations.
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