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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
SUBJECT: CALCULATING CURRENCY SECTION: 95(2)(f)(ii), REG
5907(6)]
Canadian Tax Foundation
Corporate Management Tax Conference
Subparagraph 95(2)(f)(ii), Regulation 5907(6)
Question
For purposes of subparagraph 95(2)(f)(ii) and Regulation 5907(6), under what circumstances will a particular currency be considered "reasonable in the circumstances"? Specifically, if a corporation carrying on business in a foreign jurisdiction other than the United States is financed by U.S. dollar loans or shares issued in U.S. dollars, is it reasonable to calculate any gains or losses in respect of the loans or shares in U.S. dollars or must the currency of the country in which the particular corporation is resident be used? Is the currency used in the financial statements of the corporation relevant?
Department's Position
What is reasonable in the circumstances can only be determined on a case by case basis. There are no hard and fast rules. In our view the currency in which a particular affiliate's financial statements are presented, or shares or loans are denominated, are not, in and by themselves, reasonable bases for such currency to be the "calculating currency".
Where a particular currency has become the generally accepted currency for conducting business in a country, such currency may be considered "reasonable in the circumstances", notwithstanding that some other currency is the official currency of that country. As well, the currency that is used for income tax purposes in the foreign jurisdiction would normally be considered "reasonable in the circumstances".
Prepared by: Tim Kuss
Date: May 21, 1992
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