On an administrative basis, the partners 
of a partnership do not need to file a 
Québec information return unless:
• at the end of the fiscal period, either:

– the total combined absolute value 

of the partnership’s revenue and 
expenses exceeded $2 million, or

– the partnership has more than 

$5 million in assets

• at any time during the fiscal period:

– the partnership had more than 

five members,

– either the partnership was itself 

a member of another partnership 
or one of its members was also 
a partnership,

– one of the members of the 

partnership was a trust or a 
corporation,

– exploration and development 

expenses were renounced in 
favour of the partnership or 
amounts of assistance were 
allocated to the partnership, 
because the partnership invested 
in flow-through shares, or

– the partnership was a SIFT entity and 

had an establishment in Québec.

Each person who holds an interest in a 
partnership as an agent or representative 
must complete and file a separate Québec 
information return for each such holding.

Joint Ventures

The participants in a joint venture 
are considered to carry on directly 
the activities of the joint venture. The 
participants are required to report the 
tax results of the joint venture in their 
own tax returns.

Functional Currency 

Tax Reporting

Qualifying Canadian-resident 
corporations can elect to compute 
their Canadian tax results using 

their functional currency for financial 
reporting purposes rather than the 
Canadian dollar. 
The functional currency election is 
advantageous for the following reasons:
• Corporations need not maintain 

Canadian-dollar books solely for 
income tax purposes. This reduces 
the burden of compliance.

• Corporations can eliminate the 

distorting effect of foreign exchange 
gains and losses on their tax and 
financial results that arise solely from 
computing their Canadian tax results 
using the Canadian dollar. 

Corporations must meet the following 
conditions to make the functional 
currency election:
• The corporation must be a Canadian-

resident corporation throughout the 
particular taxation year; a Canadian 
branch of a foreign owner is not 
entitled to file on this basis.

• The corporation must file the 

election to have the functional 
currency rules apply. 

• The functional currency of the 

corporation (currently limited to the 
US dollar, the British pound, the 
euro, and the Australian dollar) must 
be the primary currency in which 
the corporation maintains its books 
and records for financial reporting 
purposes throughout the year. This will 
be the same as the functional currency 
determined under generally accepted 
accounting principles (GAAP) or 
international financial reporting 
standards (IFRS), as applicable. 

• The corporation must not have 

previously filed a functional currency 
election. 

In its first functional currency year, 
an electing corporation must translate 
its Canadian-dollar tax attributes into 
the functional currency using the spot 
rate in effect on the last day of the 

preceding tax year. For debt obligations 
denominated in a currency other than 
the functional currency, the principal 
amount at the end of the preceding tax 
year must be converted using the spot 
rate at that time. Any unrealized foreign 
exchange gains and losses at the time 
of conversion (including on amounts 
denominated in the functional currency) 
are “locked in” and must be recognized 
for tax purposes on a pro-rata basis as 
the debt’s principal amount is repaid. 
A corporation should evaluate trends in 
currency movement to determine the 
optimal timing of making the election.

A corporation is allowed to revoke the 
election and revert to using Canadian 
dollars. If the corporation has revoked 
its election, or if it ceases to qualify as 
a functional currency reporter, it can 
never again make the election. Also, 
once the election has been made, 
the corporation cannot subsequently 
switch to a different functional currency. 
Specific anti-avoidance rules apply to 
prevent circumventing this one-time rule 
by means of corporate reorganizations 
or asset transfers. 

Canadian corporations operating in the 
mining, energy, and other resource 
industries are obvious beneficiaries 
of the functional currency election 
because the commodity markets within 
which they operate are conducted 
mostly in US dollars. The election will 
often allow these corporations to align 
their Canadian tax computations with 
their financial reporting, eliminating 
permanent differences arising from 
foreign exchange gains or losses 
recognized for tax purposes but not 
financial reporting purposes, and 
vice versa. 

However, in all provincial jurisdictions 
except Ontario and Québec, mine 
operators are still required to compute 
provincial mining tax and file mining tax 
returns in Canadian dollars. 

© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms 
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

 

Overview of the Canadian Tax Regime 

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