Interpretation Note 101 Income Tax Act, Section 24I: Gains or Losses on Foreign Exchange Transactions

SARS issued IN 101 on 12 July 2023 providing guidance on the interpretation and application of section 24I of the Income Tax Act.

Section 24I governs the income tax treatment of foreign exchange gains and losses on exchange items as well as premiums or like consideration received or paid in respect of a foreign currency option contract (FCOC) entered into and any consideration paid in respect of an FCOC.

Under section 24I, exchange differences calculated for a year of assessment are generally included in or deducted from income whether realised or not and whether of a capital or revenue nature. The legislation was drafted in this manner in line with the view that gains and losses on foreign exchange transactions largely represent finance charges and as a result must be brought to account on a revenue basis for tax purposes at the end of a year of assessment even if not realised.

There are limited circumstances in which the inclusion of a foreign exchange gain or loss calculated in respect of an exchange item in a particular year of assessment is deferred and recognised in a later year of assessment.

You can read IN 101 here.