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Summary FOREX Tax Legislation
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This document provides a detailed summary of FOREX found in the tax legislation
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LML4804 PORTFOLIO MEMO - MAY/JUNE 2023 - SEMESTER 1 - UNISA - (DETAILED ANSWERS - DISTINCTION GUARANTEED!)
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Forex FEC - Forward exchangeRelevant sections: s25D, S24I, par43 8th schedule
contract
Non-monetary Assets:
OC - Foreign currency option
Trading stock contract
Capital Assets
Any other deductible expenditure
S25D Translation:
S25D(1) income and expenses = spot rate
S25D(2) permanent establishment outside Republic = average rate
S25D(3) Natural person or trust (not trading) = taxpayer can elect average rate (Default is spot)
S24I Exchange differences on exchange items:
S24I(2) Triggers for section to apply:
Company
Trust carrying a trade.
Natural person or trust holding unit of currency or debt as trading stock (e.g money lender)
Natural person or trust holding FEC or OC
Steps for calculating exchange difference on exchange items:
Step 1: Identify exchange item.
Step 2: Determine ruling exchange rates.
Step 3: Calculate foreign exchange difference.
Step 4: Determined exchange difference should be deferred.
Exchange item:
Unit of currency dollar note or coin.
Debt debtors or creditors in which foreign debt is invoiced.
Forward exchange contract agreement in which one person exchanges an amount of currency
(FEC) for another currency at future date at a specified exchange rate.
Option contract Agreement in which a person acquires a right to buy/ sell to another
person on or before expiry date at specified exchange rate
Ruling exchange rates:
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