March 2024 Newsletter

Foreign income must be reported to CRA at the spot rate

If you earn income in a foreign currency, section 261 of the Income Tax Act says that you are required to convert it to Canadian dollars, for purposes of reporting it on your tax return, using the “spot rate” — the “official” currency exchange rate on the day the income arose (which for a pension payment or investment income, means the day you receive it).

In a recent case, Petcu v. The King, 2023 TCC 155, Mr. Petcu received a pension from Romania. His Canadian Old Age Security (OAS) Guaranteed Income Supplement (GIS) was reduced because of this pension income. He appealed to the Tax Court of Canada.

The Tax Court judge explained that the Court can hear OAS appeals on the question of a person’s income, so the appeal was properly brought to the Tax Court. The pension from Romania was part of Mr. Petcu’s income, and so his GIS was indeed properly reduced.

The judge also noted that the CRA’s Income Tax and Benefit Guide “specifically refers to using the Bank of Canada exchange rate in effect on the day the income is received for this conversion”. Thus, the Court ruled, the Bank of Canada exchange rate (spot rate) had to be used.

Last modified on March 1, 2024 12:00 am
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