South Africa proposes tighter rules on deferring foreign exchange gains for certain related-party debts from January 2026.
South Africa’s government has proposed amendments to section 24I(10A) of the Income Tax Act through the Draft Taxation Laws Amendment Bill 2025 (2025 DTLAB), aiming to tighten the rules for deferring foreign currency gains and losses on certain related-party debts.
Currently, section 24I(10A) allows taxpayers to defer otherwise taxable “exchange differences” arising from foreign currency debts owed to or by connected persons or companies within the same group.
Deferral is permitted provided the debt is unhedged, not funded by unrelated parties, and does not constitute a current asset or liability in the taxpayer’s IFRS financial statements.
The proposed amendment targets the requirement relating to IFRS reporting. Under the revision, deferral will only apply if the debt or any portion of it does not appear as a current asset or liability in financial statements. This means that if a debt is no longer reflected in a taxpayer’s accounts, the related exchange differences cannot be deferred. An example includes debts that are impaired but still legally enforceable.
The change is intended to provide clarity on when exchange differences may be deferred, although it introduces practical complexities in applying the rules to different types of debts.
The amendment is scheduled to take effect for years of assessment ending on or after 1 January 2026.
