1. Open your image and create a duplicate (shortcut: Shift+D). Close the original image.
2. Resize and/or crop your photo to the desired size.
3. Convert the background layer to a raster layer (right-click on background layer > Promote Background Layer.)
4. Select the Rectangle tool and select a background color (the color you choose doesn’t matter since it will be deleted in a later step.)
5. Enter the amount of “curve” you want your corners to have in the Horizontal Radius and Vertical Radius fields, found in the Tool Options palette. This will depend on how large your photo is and how rounded you want the corners to be.
6. With the Rectangle tool, and Create On Vector checked, click and drag a rectangle over your image.
7. If your rectangle’s edges do not fall where you want them, select the Object Selection tool and drag the nodes of the rectangle out to where you want them.
8. Center the rectangle over your image by clicking on Center In Canvas:
9. With the Object Selection tool still activated and the rectangle selected, create a selection from Vector Object (Ctrl+Shift+B).
10. With the rectangle select, delete the Vector layer that contains the rectangle from the Layers palette (right-click on vector layer > delete).
11. You should now have your image showing with the shape of the rectangle selected:
12. Crop the image to selection (Shift+R). You should now have a photo with rounded corners. You can now copy this image and paste it into your layout as a new layer.
Hope this helps : )