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For tax, the CRA wants every foreign amount in Canadian dollars, and in general it expects the Bank of Canada rate in effect on the day the amount arose. So software that works with multiple currencies needs to do three things: keep the original amount, store the rate used and show the Canadian dollar result. Which named products do this changes with each release, so here’s a way to test them yourself.
What should multiple currencies accounting software do?
Picture an invoice for US$2,000 sent to a customer in the States. Say, purely as an illustration, that the rate on the invoice day is 1.3500. Your books should show C$2,700.00 as income. Three weeks later the customer pays, and the rate has moved to 1.3700, so the cash that lands is worth C$2,740.00. The C$40.00 difference is an exchange gain, and good software records it as its own line instead of burying it in sales.
Flip the rates and you get a loss. Either way, the program should keep the invoice, the payment and the gain or loss linked, so you can trace every dollar. The rates above are made up for the example. Use the real ones on your own dates.
Bills work the same way in reverse. Mei, a freelance illustrator in Vancouver, pays a US$500 stock-image bill when the rate is 1.3400 instead of the 1.3600 on the bill date. She booked C$680.00 of expense but paid C$670.00, and that C$10.00 is a small gain. A few bucks here and there is normal, and the software should file it without drama.
Which exchange rate does the CRA accept?
The CRA’s general rule is the Bank of Canada rate on the day the amount arises. For many payments spread through a year, such as a monthly foreign pension, it points to the average annual rate. Other sources are accepted in certain situations, so check the page before you choose something unusual.
| Situation | Rate to use |
|---|---|
| A single sale or expense | Bank of Canada rate on that day |
| Many payments through the year | Average annual rate |
| Day with no rate quoted | Closest earlier day with a rate |
| A source other than the Bank of Canada | Accepted only if the CRA’s conditions are met |
The CRA’s income tax folio on reporting currency covers the day-without-a-rate point in so many words:
If the Bank of Canada ordinarily quotes such a rate, but no rate is quoted for that particular day, then the closest preceding day for which such a rate is quoted should be used.
Income Tax Folio S5-F4-C1, Income Tax Reporting Currency, canada.ca
Ask whether the software pulls the daily rate itself or needs you to type it. Typing rates by hand for fifty invoices is where mistakes creep in.
Does sales tax change with the currency?
Tax is still owed on the sale, but it’s reported in Canadian dollars. The CRA’s GST/HST memorandum on conversion of foreign currency says that when the price is in a foreign currency, its value is worked out in Canadian dollars on the day the GST/HST is payable. You can use the rate from the source you used for an actual conversion, from a Canadian chartered bank or from the Bank of Canada, and an average rate for the month in which the tax becomes payable can also be used. Keep documentary evidence of the rate you picked.
Whether tax applies at all to a sale abroad depends on what you sell and where, so don’t guess. Use the GST/HST calculator for a Canadian-dollar sale to see what the tax would be at a normal rate.
Practical tests before you buy
Run four checks in a trial. Create an invoice in US dollars. Receive payment on a later date with a different rate. Pay a foreign supplier bill. Then run a report in Canadian dollars for the year. If any step needs a workaround, find out what it is.
Also ask how many currencies the plan allows, since some tiers cap this. And ask how you’d get the data out, because the CRA generally expects records kept for six years from the end of the last tax year they relate to.
If you’re a sole proprietor, foreign income lands on your personal return, so the self-employed tax calculator shows the tax on that profit. Its deductions lower income tax but not CPP, and it leaves out EI, so treat the result as a ballpark. For a company, use the corporate tax calculator. A corporation may also be able to report in a functional currency, which has its own CRA rules. Ask your accountant before you try it.
Mistakes that cost money
The first is converting at today’s rate when you file, rather than at the rate on the transaction date. The second is treating a bank’s charged rate as the tax rate without checking. The third is forgetting foreign bank fees, which reduce what you actually receive. The last is mixing currencies in one bank account without a clear record.
One more thing. Small differences happen. A gain of a few dollars on a payment is normal, and it isn’t a reason to fuss. But a large gain or loss on a big invoice deserves a second look.
Where the numbers come from
The rate rules come from the Canada Revenue Agency‘s income tax folio on reporting currency, its GST/HST memorandum on foreign currency and its guidance on foreign interest and pension income, read on 11 October 2026. The 1.3500, 1.3700, 1.3400 and 1.3600 rates are invented for the examples. This site hasn’t tested any software’s features or prices and has no link with the CRA.
Frequently asked questions
Which exchange rate do I use for Canadian tax?
In general the Bank of Canada rate on the day the amount arises. For many payments over a year the CRA points to an average annual rate.
Do I report foreign sales in Canadian dollars?
Yes. Your return is in Canadian dollars, so convert each amount.
What is an exchange gain or loss?
The difference between the Canadian dollar value on the invoice day and on the payment day. Good software records it as its own line.
Is GST/HST charged on foreign currency invoices?
That depends on what you sell and where the customer is. We couldn't confirm the conversion rules, so check the CRA's GST/HST guidance.
Can software choose the rate for me?
Some can pull daily rates. We couldn't verify any product, so check that in the trial.
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