A client received Foreign dividends tax and CGT Statement for the year 2017 from Cidatel wealth management all amounts are in USD$ except the total CGT gain , how to I declare the dividends and Capital gains for 2017 when there are no exchange rate for th
Important:
This answer is based on tax law for the year ending 28 February 2018.
Answer:
For purposes of the guidance that follows, we accepted that the client is an individual.
Section 25D of and paragraph 43 of the Eighth Schedule to the Income Tax Act are then relevant.
Section 25D allows a natural person to “elect that all amounts received by or accrued to, or expenditure or losses incurred by that person … 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.”
The Income Tax Act defines the term ‘average exchange rate’, but you are correct that it doesn’t provide the spot rates or average exchange rates. It can be obtained from various sources, but SARS however, regularly publishes the average exchange rates.
Paragraph 43 deals with the determination of a capital gain or loss on disposal of an asset that is acquired or disposed of in a foreign currency. It contains rules for converting the proceeds and base cost into the ‘local currency’ (that is, rand or a functional currency). Generally, there are two ways of translating a capital gain or loss into rand, namely, the simple method where the capital gain or loss is determined in the foreign currency and then translated to rand at the time of disposal – paragraph 43(1). Under the comprehensive method the expenditure is translated to rand at the time it is incurred while the proceeds are translated to rand at the time the asset is disposed of – paragraph 43A.
Remember that foreign taxes are converted differently.