Page 102 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes PN 4/1999 ANNEXURE B
RULING EXCHANGE RATE
EXCHANGE ITEMS
LOAN, ADVANCE OR DEBT (L, A or D)
FORWARD EXCHANGE CONTRACT (FEC)
FOREIGN CURRENCY OPTION CONTRACT
Transaction date
Spot rate on transaction date (or acquisition rate1)
or
If a related or matching FEC is entered into to hedge the L, A or D and the forward rate ito such FEC was used to record the L, A or D for accounting
purposes, such forward rate
Forward rate in terms of the FEC
Nil rate
Date of translation
Spot rate on date of translation or
If a related or matching FEC
is entered into to cover the L, A or D and the forward rate ito such FEC was used to translate the L, A or D for accounting purposes, such forward rate
Market related forward rate available for the remaining term of the FEC
or
If the forward rate in terms of the FEC has been used to translate a L, A or D, such
forward rate
or
If a FEC quali es as an affected contract, such forward rate
Rate is determined as follows: Market value ÷ foreign currency amount
or
In the case of an affected contract, consideration paid or received ÷ foreign currency
amount
Date of realisation
Spot rate on date of realisation (or disposal rate 2)
Spot rate on date of realisation
Rate calculated as follows:
(i) If option is exercised or has
matured:
Market value ÷ Foreign currency amount
(ii)If option is disposed of: Receipt from disposal ÷ foreign currency amount
Notes:
1. If the loan, advance or debt is acquired and any consideration paid or payable in respect of the acquisition of such loan, advance or debt was determined by using a rate other that the spot rate on the transaction date, then such other rate (de ned as the ‘acquisition rate’ in section 24I (1)), must be used as the ruling exchange rate. (See example 4)
2. If the loan, advance or debt is disposed of and any consideration received or receivable in respect of the disposal of such loan, advance or debt was determined by using a rate other than the spot rate on the date of realisation, then such other rate (de ned as ‘disposal rate’ in section 24I (1)), must be used as the ruling exchange rate. (See example 4)
3. An alternative rate to any of the aforementioned rates may be prescribed by the Commissioner, if such alternative rate is used for accounting purposes in terms of generally accepted accounting practice and such aforementioned rates are inappropriate and inapplicable.
Example 1 Example 2 Example 3 Example 4 Example 5 Example 6 Example 7
Example 8 Example 9 Example 10
ANNEXURE C
Normal loan (dollar obligation)
Forward exchange contract
Foreign currency option contract
Acquisition and disposal of a debt (dollar asset)
Debt (dollar obligation) hedge by a forward exchange contract
Debt (receivable in dollars) hedge by a forward exchange contract for a portion of the period Debt (receivable in dollars) which has become irrecoverable, was written off and then partially recovered
Change in the type of currency unit
Use of average spot rates to record debts for accounting purposes
Postponement of exchange differences in terms of section 241 (7), in the case of a manufacturer
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SAIT CompendIum oF TAx LegISLATIon VoLume 2