GST/HST for Canadian freelancers paid in USD

Currency and classification are separate

A US-dollar invoice still needs a GST/HST classification. The customer's country and the payment currency are facts, not the legal conclusion. Determine whether the supply is taxable at an applicable rate, zero-rated, exempt, or unresolved and, separately, whether it is made in or outside Canada.

No tax on an invoice does not prove that a supply is zero-rated or exempt. It may instead be made outside Canada, or be a normally taxable supply made while the supplier remains an unregistered small supplier. Those outcomes have different threshold, registration, reporting, and input-tax-credit consequences.

Once the classification is known, convert the relevant gross consideration into Canadian dollars so the threshold records use one currency.

CRA's conversion framework

CRA's foreign-currency memorandum says the general conversion day is the day GST/HST is payable. Generally, tax is payable on the earlier of the day consideration is paid and the day it becomes due. The memorandum also accepts specified alternatives, including the day consideration is paid, the day foreign currency is acquired, or an average exchange rate for the month in which tax becomes payable.

The correct choice can depend on the facts and accounting treatment. Document the selected method and use it consistently for a reasonable period. CRA gives one year as an example of a reasonable period.

• General reference point: the day GST/HST is payable.
• Accepted alternatives include payment day and the day foreign currency is acquired.
• A monthly average may be used for the month in which tax becomes payable.
• If the selected date falls on a weekend or holiday, CRA directs use of the previous business day's rate.

Use an acceptable, documented rate source

CRA lists the source used for an actual conversion, the source normally used for actual conversions, a Canadian chartered bank, the Bank of Canada, and the CBSA rate used for customs value as acceptable sources. A chosen source has to be supported by documentation.

Save the source name, rate, conversion date, method, and evidence with the invoice record. A generic rate displayed by an unrelated data service is not automatically acceptable just because it looks authoritative.

Keep processor fees separate

CRA's small-supplier calculation uses revenue before expenses. If a platform deducts a processing fee before depositing the balance, record the gross invoice and the fee separately rather than treating the net deposit as the supply amount.

That treatment assumes the platform acts as your agent or payment processor and the customer's gross amount is consideration for your supply. If the platform is a reseller or merchant of record, identify your contractual recipient and the consideration under that agreement first.

What belongs in the evidence file

The objective is a repeatable trail from the original invoice to the Canadian-dollar amount in the quarter test. Keep enough detail for another person to reproduce the result.

• Invoice number, invoice date, agreement due date, payment date, customer alias, currency, and gross foreign amount.
• Whether payment preceded the due date and why the selected threshold date belongs in that quarter.
• Conversion date, why that date was used, CAD-per-unit rate, and rate source.
• A screenshot, statement, or other reference supporting the rate.
• Processor fees and foreign-exchange charges recorded separately.
• The supply classification and the evidence supporting any zero-rating position.