Page 196 - SAIT Compendium 2016 Volume1

s 24I INCOME TAX ACT 58 OF 1962 s 24I
‘exchange item’ of or in relation to a person means an amount in a foreign currency—
(a) which constitutes any unit of currency acquired and
not disposed of by that person;
(b) owing by or to that person in respect of a debt incurred
by or payable to such person;
[Para. (b) substituted by s. 53 (1) (b) of Act 22 of 2012.] (c) owed by or to that person in respect of a forward
exchange contract; or
(d) where that person has the right or contingent
obligation to buy or sell that amount in terms of a
foreign currency option contract.
[De nition of ‘exchange item’ amended by s. 18 (1) (b) of Act 21 of 1994 and substituted by s. 36 (1) (a) of Act 60 of 2001.]
‘foreign currency’ in relation to any exchange item of a person, means any currency which is not local currency;
[De nition of ‘foreign currency’ substituted by s. 31 (a) of Act 59 of 2000, by s. 36 (1) (b) of Act 60 of 2001 and by s. 27 (1) (a) of Act 74 of 2002.]
‘foreign currency option contract’ means any agreement in terms of which any person acquires or grants the right to buy from or to sell to any other person a certain amount of a nominated foreign currency on or before a future expiry date at a speci ed exchange rate;
‘forward exchange contract’ means any agreement in terms of which any person agrees with another person to exchange an amount of currency for another currency at some future date at a speci ed exchange rate;
‘forward rate’ means the speci ed exchange rate as referred to in the de nition of ‘forward exchange contract’; ‘intrinsic value’, in relation to a foreign currency option contract, means the value for the holder or writer thereof, as the case may be, determined by applying the
difference between—
(a) the spot rate on translation date or the date on which
the foreign currency option contract is realised, as the
case may be; and
(b) the option strike rate,
to the amount of foreign currency as speci ed in such foreign currency option contract: Provided that such foreign currency option contract shall have a nil value for the holder or writer thereof if such holder thereof would have sustained a loss had he exercised his right in terms of such foreign currency option contract on such translation date or date realised due to the unfavourable difference between the option strike rate and the spot rate on such translation date or date realised;
‘local currency’ means in relation to—
(a) any person in respect of an exchange item which
(d) any headquarter company in respect of an exchange item which is not attributable to a permanent establishment outside the Republic, the functional currency of that headquarter company;
(e) any domestic treasury management company in respect of an exchange item which is not attributable to a permanent establishment outside the Republic, the functional currency of that domestic treasury management company;
[Para. (e) added by s. 68 (1) (b) of Act 31 of 2013 – addition deemed to have come into operation on 27 February 2013 and applies in respect of years of assessment commencing on or after that date.]
(b) (c)
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is attributable to any permanent establishment outside the Republic, the functional currency of that permanent establishment: Provided that for purposes of this paragraph any exchange item shall be deemed not to be attributable to any such permanent establishment if the functional currency of that permanent establishment is the currency of a country which has an of cial rate of in ation of 100 per cent or more throughout the relevant year of assessment; any resident other than a headquarter company in respect of an exchange item which is not attributable to a permanent establishment outside the Republic, the currency of the Republic;
any person that is not a resident in respect of any exchange item which is attributable to a permanent establishment in the Republic, the currency of the Republic;
‘realised’ means, in relation to an exchange item, where such exchange item is—
(a) a debt in any foreign currency, when and to the extent
to which payment is received or made in respect of such debt, or when and to the extent to which such debt is settled or disposed of in any other manner;
[Para. (a) substituted by s. 53 (1) (c) of Act 22 of 2012.] (b) a forward exchange contract, when payment is received or made in respect of such forward exchange
contract;
(c) a foreign currency option contract, when payment is
(f)
any international shipping company de ned in section 12Q, in respect of an amount which is not attributable to a permanent establishment outside the Republic, the functional currency of that international shipping company;
[Para. (f) added by s. 68 (1) (c) of Act 31 of 2013 – date of commencement: 1 April 2014; the addition applies in respect of years of assessment commencing on or after that date.]
[De nition of ‘local currency’ inserted by s. 36 (1) (c) of Act 60 of 2001, substituted by s. 27 (1) (b) of Act 74 of 2002, amended by s. 42 (1) (a) of Act 45 of 2003 and by s. 40 (1) (a) of Act 35 of 2007 and substituted by s. 47 (1) of Act 7 of 2010.]
‘market value’, in relation to a foreign currency option contract, means—
(a) in the case of a person who for accounting purposes
uses a market-related valuation method in terms of a practice consistently applied by him to determine the value of all his foreign currency option contracts, the market-related value so determined; or
(b) in the case of any other person, the intrinsic value of such foreign currency option contract;
‘option strike rate’ means the speci ed exchange rate as referred to in the de nition of ‘foreign currency option contract’;
‘premium or discount on a forward exchange contract’ . . .
[De nition of ‘premium or discount on a forward exchange contract’ deleted by s. 44 (a) of Taxation Laws Amendment Act, 2015 – date of commencement: date of promulgation of Taxation Laws Amendment Act, 2015.]
Prelex
Wording of de nition of ‘premium or discount on a forward exchange contract’ in force until its deletion wef date of promulgation of Taxation Laws Amendment Act, 2015
‘premium or discount on a forward exchange contract’ means the amount obtained by applying the difference between the forward rate in respect of a forward exchange contract and the spot rate on the date on which such forward exchange contract was entered into, to the foreign currency amount speci ed in such forward exchange contract;
received or made in respect of the right in terms of SAIT CompendIum oF TAx LegISLATIon VoLume 1