Updated Checked by the Tax-Services.ca editorial team How we check
Book foreign currency transactions in Canadian dollars, using the Bank of Canada exchange rate on the day each amount arises. That’s the CRA’s general rule, and it covers a US dollar invoice you send, a euro bill you pay and a US dollar deposit that lands in your account.
It sounds simple. The trouble starts when the invoice date, the payment date and the day your bank converts the money are three different days with three different rates. This page shows how to record each step so your books match what the CRA expects to see.
Which exchange rate goes on each entry?
The CRA’s pages on reporting foreign amounts give one default and two exceptions. Stick with the default unless you have a real reason not to.
| Situation | Rate the CRA describes |
|---|---|
| One invoice, bill or payment | Bank of Canada rate on the day the amount arises |
| Many similar amounts over a period | An average rate for the period may be used, for example the annual average for payments spread through the year |
| No Bank of Canada rate fits | A rate from another source that is widely available, verifiable, published by an independent provider and used consistently |
The CRA names Bloomberg, Thomson Reuters and OANDA as sources it generally accepts. Whatever you pick, pick it once and use it every time. Switching to whichever rate looks friendliest on a given day is how books stop making sense.
What happens between the invoice and the payment?
Say you invoice a US client for US$2,000. On the invoice date the rate is 1.40, so you book C$2,800 as income and as money owed to you. (These rates are made up to show the arithmetic, so don’t use them for a real entry.)
Thirty days later the client pays and the rate is 1.36. The US$2,000 is now worth C$2,720. Your receivable is C$2,800, so C$80 is missing. That C$80 is a foreign exchange loss. Had the rate gone to 1.44, you’d record an $80 gain instead.
So the income doesn’t change.
It stays at C$2,800, the rate on the day you earned it. The $80 is a separate line. How that line is taxed depends on whether the money was part of your business or a capital item, and our guide to currency exchange gains and losses covers that split.
How do you keep foreign currency transactions tidy in the ledger?
Write down three things on every foreign entry: the amount in the original currency, the rate and where it came from. Then someone else can rebuild your Canadian dollar figure in a minute. That someone might be you, next April.
If you hold a US dollar bank account, give it its own ledger account. Each deposit and withdrawal goes in at that day’s rate, and you’ll see the balance in both currencies. Trying to squeeze it into your Canadian account is where the confusion begins.
Do you need to revalue unpaid invoices at year-end? Your accounting framework has its own rules on that, and they can differ from the tax rules. No single CRA page settles it for every business, so ask whoever prepares your financial statements which method they use, then keep doing it the same way.
To see how foreign sales feed into your tax bill, run the numbers in the self-employed tax calculator or, if you’re incorporated, the corporate tax calculator. Both work in Canadian dollars, so convert first.
What if the bank gives you less than the rate says?
It often does. Take Lena, a freelance illustrator in Windsor who invoices a US publisher for US$2,000. Using the made-up 1.36 rate on the payment day, she expects C$2,720. Her bank credits C$2,705, because its own conversion rate and a wire fee ate into the deposit. She books the income at the invoice-date figure, records the C$2,720 as the market value of what was paid, and puts the C$15 shortfall in bank charges. The deposit now agrees with her statement, and the bank reconciliation closes without a mystery balance.
It’s a few bucks on one invoice. Across fifty invoices a year it’s real money, and worth knowing about when you pick where your US dollars land.
Where do people go wrong?
Mixing sources is the big one. A bank statement rate for one payment, a card rate for the next and a Bank of Canada rate for the invoice gives you gaps you can’t explain.
The second is converting everything at one year-end rate. The CRA says the rate is the one on the day the amount arises, with an average allowed in certain circumstances. A single closing rate for twelve months of sales isn’t either of those.
The third is ignoring bank fees. Your bank may credit a slightly different amount than the clean rate suggests. Book what actually reached the account, and put the difference in bank charges or exchange loss, so the bank rec closes.
GST/HST has its own conversion rule. The CRA’s memorandum on conversion of foreign currency says the value of a foreign currency price is worked out in Canadian dollars on the day the GST/HST is payable, or another day the CRA accepts, such as the day the consideration is paid or the day the foreign currency was acquired. A monthly average rate is also acceptable. If you’re working backwards from a total, the GST/HST calculator helps once you have the Canadian dollar amount.
The sources behind this page
The rate rules come from the Canada Revenue Agency‘s pages on line 12100 and line 10400 of the personal return, which describe the Bank of Canada rate, accepted alternatives and averages. The CRA also publishes an income tax folio on reporting currency. The rules are written for income tax returns, so a business that keeps accounts in another way should check which one applies to it. These pages were checked in September 2026.
Frequently asked questions
Which exchange rate should I use for a foreign invoice?
The CRA says to use the Bank of Canada rate in effect on the day the amount arises. Other independent sources are accepted in certain cases if you use them consistently.
Can I use an average exchange rate?
In certain circumstances, yes. The CRA gives the example of payments received through the year, where the annual average rate can be used.
Do I record a US dollar bank account separately?
It helps a lot. Give it its own ledger account, record each movement at that day's rate and keep the US dollar balance visible.
What if the rate changes before the client pays?
Keep the income at the rate on the invoice date. The difference when the money arrives is a separate exchange gain or loss.
Does my bank's rate count?
Not automatically. The CRA accepts other sources only if they are widely available, verifiable and used consistently. Book what actually reached your account and record the gap as a charge or exchange difference.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST