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Average Exchange Rates
- 20 June 2023
- Accounting
- South African Accounting Academy
The Income Tax Act, 1962, provides specifically that certain amounts expressed in a foreign currency must be translated into rand by the application of an applicable average exchange rate.
The term “average exchange rate” is defined in section 1(1) of the Act and means, in relation to a year of assessment, the average exchange rate determined by using the closing spot rates at the end of daily or monthly intervals during a year of assessment. This rate must be applied consistently within that year of assessment.
The South African Reserve Bank (SARB) determines weighted average exchange rates, based on the foreign exchange transactions of commercial banks.
SARS publishes these rates on a quarterly basis, which may be used by stakeholders (taxpayers) in the determination of the average exchange rate when required in the Act.
- Table A: A list of the average exchange rates of selected currencies for a year of assessment as from December 2003
- Table B: A list of the monthly average exchange rates to assist a person whose year of assessment is shorter or longer than 12 months
- Example How to calculate Average Exchange Rates for a period longer than 12 months
These average exchange rates do not represent spot rates for purposes of the Act.
The use of these average exchange rates is not compulsory.
Stakeholders using average exchange rates which differ from those published by SARS must, however, keep record of all calculations for audit purposes.
The next update can be expected in September 2023.
Click here to download the Tables A and B:
https://www.sars.gov.za/legal-counsel/legal-counsel-publications/average-exchange-rates/
Relevance to Auditors, Independent Reviewers & Accountants:
- The Income Tax Act is yet another piece of legislation that your clients must comply with, and which you must assess compliance with. If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
- As an auditor, independent reviewer or accoutant, you need to consider the latest publications and tools that have been issued by Regulatory bodies, e.g. SARS.
- As a tax practitioner, you need to advise your clients on the latest publications available from SARS to facilitate foreign exchange deduction.
Relevance to Your clients:
- Taxpayers should be aware of the latest publications available from SARS to facilitate foreign exchange deduction.
To stay current with all the latest changes and updates subscribe to our Monthly Compliance and Legislative Update series for R 250.00 per month. This gives you access to a monthly 2-hour webinar and monthly newsletter:
https://accountingacademy.co.za/profession/monthly-legislation-update
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