![]() ![]() average) gives you the best tax result based on the timing of your payments.įor example, let’s say Sarah received a total of US$3,000 of U.S. With the fluctuating Canada/US rate, you may wish to take a closer look and determine which conversion method (actual vs. Indeed, the current 2017 General Income Tax and Benefit Guide states that you should “use the Bank of Canada exchange rate in effect on the day you received the income.” The CRA responded that there was nothing in the Income Tax Act nor in the CRA’s published material that actually requires a taxpayer to use the Bank of Canada annual average exchange rate to convert pension or investment income to Canadian dollars. The taxpayer wanted to know if she could ignore the average annual rate for the year and use the actual exchange rates she received from her bank when she deposited her foreign pension and investment income into her Canadian bank account. ![]() Article contentīut just because the average annual exchange rate is convenient, does it mean that you have to use that rate for the year? Just over a decade ago, the Canada Revenue Agency (CRA) was asked whether a taxpayer was required to use the Bank of Canada annual average exchange rate to convert pension and investment income to Canadian dollars. This advertisement has not loaded yet, but your article continues below. Note that if you had foreign taxes withheld on foreign dividends paid to your TFSA, you cannot claim a foreign tax credit for those taxes, which is why it’s best to hold foreign (including U.S.) dividend paying stocks outside a TFSA. You would also use the same rates that were used for the income to calculate the Canadian equivalent of the foreign taxes paid.
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