South Africa: Unrealised gains, foreign currency loans

Revised tax treatment in South Africa

There are changes to the rules in South Africa with respect to the tax treatment of unrealised gains on foreign currency loans.


Related content

Section 24I of the Income Tax Act of No. 58 of 1962 is the provision that addresses the tax treatment of currency movements arising with respect to foreign currency loans. In situations of related-party debt, the rule was that unrealised movements were typically deferred and realised movements were taxed. 

Revised treatment

The provisions deferring the taxation of unrealised movements were recently amended, and these provisions have been narrowed. Taxpayers, therefore, need to examine the scope changes to assess whether unrealised amounts now must be taken into account and from what date.

What may be of greater concern is that many taxpayers have advanced foreign currency loans (i.e., loans denominated in currencies other than Rands) to group companies. What happens when these group companies are currently unable to repay the debt? The depreciating Rand may cause significant exchange gains on these loans, and the technical nature of section 24I does not seem to consider that bad debts would result in losses, not gains. 



The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Request for proposal



KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.