In the field of international taxation, the question of foreign
exchange fluctuations is of particular importance because of the
variety of currencies used worldwide and the requirements by local
tax authorities generally to use the domestic currency for tax
reporting in the home country.
Section 24I of the Income Tax Act 1962, (Act No 58 of 1962)
("the Act") contains explicit and comprehensive rules
designed to deal with the tax consequences of foreign-exchange
issues. The Taxation Laws Amendment Bill 2012 proposes that part of
the rules contained in section 24I be amended to ensure that
currency gains or losses in respect of debt, and the effective
hedge, between related entities will be deferred until realisation.
If enacted, the new regime will replace the current system for
taxing currency gains and losses arising in the case of related
companies which is divided into two sets of rules that depend on
different effective dates.
