The effect on taxpayers of new tax legislation regarding foreign exchange transactions

Abstract

Numerous problems have been encountered with the practical application of the new taxation legislation relating to foreign currency transactions. The purpose of this paper is to analyse the amendments relating to foreign exchange transactions and to illustrate, by using examples, the far reaching effect of these amendments on the taxpayer, as well as the effect on the financial statements for accounting purposes. The paper concentrates on the amendments to section 25D and 24I (with specific reference to section 24I(11)) contained in the Second Revenue Laws Amendment Act (Act 74 of 2002) (promulgated on 13 December 2002) and the Revenue Laws Amendment Act (Act 45 of 2003) (promulgated on 22 December 2003). The paper continues to also illustrate the interaction and the effect of the Eighth Schedule on sections 25D and 24I.