Pick an FX method and let it work
Large US-dollar payables mean currency swings move taxable income whether you plan for them or not. The framework is stable: payables booked at the invoice-date rate, realized gains and losses recognized on settlement as ordinary income for a trading business, and open payables revalued at year-end under one consistent method. The planning value is in the consistency, because a method applied the same way every year survives review, while one that changes with the exchange rate invites it.
| Event | Treatment |
|---|---|
| Supplier invoice received in US dollars | Booked at that day's rate, setting the payable |
| Payment settled months later | Realized gain or loss, ordinary income for a trading business |
| US-dollar payables open at year-end | Revalued under one consistent method, books and T2 aligned |
| Forward contract on a confirmed order | Locks the Canadian-dollar cost; the result follows the purchase it hedges |
Hedging basics, without the jargon
A forward contract is a bank agreeing today on the rate you will pay when the supplier invoice comes due, which turns an unknowable cost into a known one. For an import business hedging real purchase orders, the gain or loss on the contract generally takes its character from the purchase it protects, so the tax result stays on income account alongside the goods. The discipline is to hedge confirmed orders, not currency opinions.
Walla Assaf spent years in banking and corporate finance before founding Tauro, so conversations about forward facilities, US-dollar accounts and what your bank will actually offer are part of our Tax Planning & Advisory work, not a referral elsewhere.
The write-down calendar
Inventory can be valued at the lower of cost and fair market value, which makes the dead-stock write-down a legitimate year-end lever when the evidence supports it: SKUs with no movement for months, superseded models, clearance pricing below landed cost. Taking the loss in the year the value actually fell beats hoarding it for a convenient year, because the CRA looks for the event behind the number.
There is a tension worth naming. The balance sheet your lender margins looks better with inventory at full cost, and the tax return looks better with honest write-downs, so we time markdowns and disposals deliberately and brief the bank rather than letting the two documents drift apart.
Owner pay that respects the buying season
Ontario's small-business rate of about 12.2% on the first $500,000 of active profit means a dollar retained in the corporation buys meaningfully more inventory than a dollar that made the round trip through a top personal bracket. For owners still scaling their lines, the usual answer is a modest salary for RRSP room and stability, dividends declared in the months when the buying calendar is not consuming every dollar, and the rest left inside on purpose. Dividends to family who do not genuinely work in the business run into TOSI, and instalment schedules deserve a reset after any breakout year so the CRA is not holding cash a supplier deposit needs.
Structure: keep the building away from the containers
Import businesses carry live liabilities, from product claims on goods whose maker has no Canadian presence to supplier disputes and border reassessments. Where the operating company owns the warehouse, all of it sits in one basket, so a common move is a holding company owning the building and leasing it to the operator, planned through our Corporate Restructuring work. Two flags complete the picture: the distribution agreements themselves are the asset a future buyer pays for, which is where the $1.25 million lifetime capital gains exemption becomes worth protecting, and duty itself can sometimes be planned, since HS classification reviews and CBSA duty-relief programs exist for goods that later leave Canada. That work belongs with a licensed customs specialist as volumes grow; we plan the tax around whatever it finds.
