Income Tax Act, 1962 (Act No. 58 of 1962)Chapter II : The TaxesPart I : Normal Tax25D. Determination of taxable income in foreign currency |
| (1) | Subject to subsections (2), (3) and (4), any amount received by or accrued to, or expenditure or loss incurred by, a person during any year of assessment in any currency other than the currency of the Republic must be translated to the currency of the Republic by applying the spot rate on the date on which that amount was so received or accrued or expenditure or loss was so incurred. |
[Section 25D substituted by section 50(1)(a) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010) - effective 1 January 2011]
| (2) | Any amounts received by or accrued to, or expenditure incurred by, a person in any currency other than the currency of the Republic which are attributable to a permanent establishment of that person outside the Republic must be determined in the functional currency of that permanent establishment (other than the currency of any country in the common monetary area) and be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment. |
[Section 25D substituted by section 50(1)(a) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010) - effective 1 January 2011]
| (2A) | Subsection (2) shall not apply to the extent that— |
| (a) | the other currency contemplated in that subsection is not the functional currency of that permanent establishment; and |
[Section 25D(2A)(a) substituted by section 50(1)(b) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010) - effective 1 January 2011]
| (b) | the functional currency is the currency of a country which has an official rate of inflation of 100 per cent or more throughout the relevant year of assessment. |
[Section 25D(2A)(b) substituted by section 50(1)(b) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010) - effective 1 January 2011]
| (3) | Notwithstanding subsection (1), a natural person or a trust (other than a trust which carries on any trade) may elect that all amounts received by or accrued to, or expenditure or losses incurred by that person or trust in any currency other than the currency of the Republic, be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment. |
(4) Where, during any year of assessment—
| (a) | any amount— |
| (i) | is received by or accrued to; or |
| (ii) | of expenditure is incurred by, |
a headquarter company in any currency other than the functional currency of the headquarter company; and
| (b) | the functional currency of that headquarter company is a currency other than the currency of the Republic, |
that amount must be determined in the functional currency of the headquarter company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.
[Section 25D(4) inserted by section 50(1)(c) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010) - effective 1 January 2011]
| (5) | Where, during any year of assessment— |
| (a) | any amount— |
| i) | is received by or accrues to; or |
| ii) | of expenditure is incurred by, |
a domestic treasury management company in any currency other than the functional currency of the domestic treasury management company; and
| (b) | the functional currency of that domestic treasury management company is a currency other than the currency of the Republic, |
that amount must be determined in the functional currency of the domestic treasury management company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.
[Section 25D(5) inserted by section 75(1)(a) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 27 February 2013]
| (6) | Where, during any year of assessment— |
| (a) | any amount— |
| (i) | is received by or accrues to, or |
| (ii) | of expenditure is incurred by, |
an international shipping company in any currency other than the functional currency of the international shipping company; and
| b) | the functional currency of that international shipping company is a currency other than the currency of the Republic, |
that amount must be determined in the functional currency of the international shipping company and must be translated to the currency of the Republic by applying the average exchange rate for that year of assessment.
[Section 25D(6) substituted by section 46(1)(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014), GG38405, dated 20 January 2015 - deemed to have come into operation on 1 April 2014]
| (7) | Any amounts received by or accrued to, or expenditure incurred by— |
| (a) | a headquarter company contemplated in subsection (4); or |
| (b) | a domestic treasury management company contemplated in subsection (5); or |
| (c) | an international shipping company contemplated in subsection (6), |
during any year of assessment in a functional currency that is a currency other than the currency of the Republic must be translated to the currency of the Republic by applying the average exchange rate for the relevant year of assessment.
[Section 25D(7) inserted by section 46(1)(b) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014), GG 38405, dated 20 January 2015]