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Foreign investments go into your Canadian books at their cost in Canadian dollars, converted at the Bank of Canada rate on the day you bought them. Income from them, such as dividends and interest, is converted at the rate on the day it arises. The CRA wants every foreign number on your return in Canadian dollars, so the rate has to travel with the record.
That rule has a side effect. A US stock has two histories, the share price and the exchange rate, and your gain or loss on sale carries both. Keep a record of each purchase with its rate written next to it, and tax time gets a lot calmer.
What do you record when you buy a foreign investment?
Record the original price, the currency, the rate and the Canadian dollar cost. That cost (what the CRA calls adjusted cost base, or ACB) is the number you’ll need on the day you sell. The T1135 form also uses cost, not market value, to decide whether you have to report at all.
| What you record | Why it matters later |
|---|---|
| Purchase date and rate | Sets your Canadian dollar cost |
| Amount in foreign currency | Lets you recheck the conversion |
| Dividends and the foreign tax withheld | The tax feeds the foreign tax credit |
| Sale date and rate | Sets the Canadian dollar proceeds |
Add a line for broker fees too. Commissions in either direction change your cost or your proceeds, and they’re easy to forget when the statement is in US dollars.
A worked example with US shares
Sam in Calgary buys 100 US shares at US$50 when the rate is 1.35. The cost is 5,000 times 1.35, or C$6,750. A year later Sam sells at US$60 and the rate is 1.40. Proceeds are 6,000 times 1.40, or C$8,400, and the gain is C$1,650. (These rates are made up for the arithmetic.)
The gain in US dollars was only US$1,000, which is C$1,400 at the sale rate. The other C$250 came from the currency: 5,000 times the 0.05 move in the rate. Sam owes tax on the whole C$1,650. Had the exchange rate fallen instead, it could have eaten part of a real share price gain.
Capital gains are only partly taxable. The inclusion rate has been 50%, so check the CRA’s current capital gains page before you rely on it. The capital gains tax calculator turns a gain like this into tax for your province.
How do you book foreign dividends and withholding tax?
Report the dividend in Canadian dollars at the rate on the day it arises. Don’t subtract the foreign tax that was withheld. The CRA’s line 12100 page says to leave the gross amount in income and claim the foreign tax separately.
Say a US dividend is US$200 and 15% (US$30) is withheld, with a rate of 1.37 that day. You book C$274 of income and C$41.10 of foreign tax, not C$232.90 of income. Both numbers go in the records, because the second one is what you’ll claim.
The claim is the federal foreign tax credit on Form T2209, entered on line 40500. For each country you can claim the lesser of the foreign income tax you paid and the Canadian tax on your net income from that country, as the CRA’s page on the federal foreign tax credit explains. To see how the extra income lifts your tax, the dividend tax calculator is a fair place to start, though it handles Canadian dividends, so treat a foreign dividend result with care.
When do foreign investments have to be reported on the T1135?
You file Form T1135 if the total cost of your specified foreign property was more than $100,000 at any time in the year. Above $250,000 the detailed version applies. Between the two, a simpler method is allowed. The CRA’s Foreign Income Verification Statement page lists the filing dates, and most individuals file by April 30.
Two points save a lot of worry. Foreign property held in an RRSP or a TFSA is excluded. And shares held through a Canadian broker can be reported in a summary by country instead of one by one.
Personal-use property and property used only in an active business are excluded too.
The penalty for filing late is $25 a day for up to 100 days, with a minimum of $100 and a maximum of $2,500, according to the CRA’s penalty table. Knowingly failing to file is much worse. You can also estimate where your registered accounts stand with the TFSA calculator, since anything held inside a TFSA stays off this form.
What mistakes come up in bookkeeping for foreign holdings?
Using today’s rate for an old purchase is the classic. So is netting the foreign tax off the dividend, and forgetting that a fund bought in US dollars and sold later in US dollars can still show a Canadian dollar gain.
Another one. Assuming a US account statement is enough. It shows US dollars, and you need the Canadian figure. Keep the rate you used next to every line. Always.
Reinvested dividends are a quieter trap. Each reinvestment is a small purchase with its own date and rate, and it adds to your cost. Skip them and you’ll overstate your gain when you finally sell, which means paying a few extra bucks of tax for nothing.
What this page doesn’t cover is foreign affiliates, trusts and partnerships, which have their own reporting. And if you hold the shares in a corporation, the treatment differs again.
Where this information comes from
The conversion rule and the dividend treatment come from the CRA‘s line 12100 page. The foreign tax credit details come from its line 40500 page and the T1135 thresholds, exclusions and penalties from its Form T1135 pages, all read in October 2026. Exchange rates and share prices in the examples are invented. This site is independent and has no link to the CRA.
Frequently asked questions
How do I convert a foreign investment to Canadian dollars?
Use the Bank of Canada rate in effect on the day the amount arises, for the purchase, each dividend and the sale.
Do I subtract foreign tax withheld from my dividends?
No. Report the dividend before the withholding and claim the tax separately as a foreign tax credit, using Form T2209.
When do I have to file Form T1135?
When the cost of your specified foreign property was more than $100,000 at any time in the year.
Are foreign holdings in an RRSP or TFSA reported on the T1135?
No. Specified foreign property held in an RRSP or a TFSA is excluded.
Does the T1135 use cost or market value?
Cost, meaning the adjusted cost base, not fair market value.
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