Summary FOREX Tax Legislation

Forex FEC - Forward exchange
Relevant 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: