Page 121 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes
PN 4/1999
R35 700 loss R7 500 gain
YEAR END 31-08-1999
Loan (DM510 000)
Ruling exchange rates:
Date of previous translation (31-08-1998) Date of realisation (30-11-1998) 3,7500
Exchange difference:
[(3,6800 – 3,7500) x DM510 000]
Portion of exchange difference which is carried over from the 1998 year of assessment:
Note:
3,6800 3,6800
The kiln was brought into use during the year, for purposes of trade. No further postponement takes place.
Interest incurred on the loan during the year (DM10 000)
Ruling exchange rates:
Transaction date (30-11-1998) Date of realisation (30-11-1998)
Exchange difference:
[(3,7500 – 3,7500) x DM10 000]
NET TAX RESULT
(+ R2 500 – R35 700 + R7 500)
RECONCILIATION
Rand equivalent of loan on transaction date (DM500 000 x 3,7000)
Interest incurred
(DM10 000 x 3,6800) + (DM10 000 x 3,7500) Rands used to repay the loan of DM520 000 on 30-11-1998
(DM520 000 x 3,7500) Net loss
3,7500 3,7500
R nil
R25 700 loss
R1 850 000 R74 300 (R1 950 000)
R 25 700
EXAMPLE 11
POSTPONEMENT OF EXCHANGE DIFFERENCES IN TERMS OF SECTION 24I (7), IN THE CASE OF A MINING COMPANY
On 1 October 1997 a company conducting mining activities signed a contract for the purchase of a new mineral processing plant to the value of $4 000 000. The plant quali es as capital expenditure in terms of section 36 of the Act. The expected completion date of the plant was 1 February 1998. The contract value was reduced by 2% for every
extra full month the contractor took to complete the contract, after the expected completion date. The debt became due on completion of the contract and had to be settled immediately.
On 1 October 1997 the company entered into a forward exchange contract in order to hedge the current Rand-cost of the plant against future exchange rate movements, namely:
SAIT CompendIum oF TAx LegISLATIon VoLume 2 113