The South African Revenue Service has issued two draft tax interpretation notes for public comments regarding special tax relief for the regional headquarter companies of foreign multinationals, and on the application of foreign-currency conversion rules.

The first note “Draft IN 63 (Issue 2) on the rules for translation of amounts measured in foreign currencies other than exchange differences governed by section 24I”provides guidance on the application of the foreign currency translation rules. In determining taxable income, foreign currency amounts must be translated to an equivalent amount in rand using either a spot rate or an average exchange rate. The Act generally prescribes which rate must be used depending upon the nature of the underlying transaction and the type of taxpayer involved.

The second interpretation note, concerning “foreign currency translation rules,” provides guidance and clarity on the interpretation and application of section 9I, which deals with headquarter companies. The draft Note briefly discusses the provisions of the Act on special tax relief for headquarter companies, as well as the specific anti-avoidance rules that are designed to prevent misuse or abuse of those provisions.

The draft does not discuss all of the sections which are applicable to headquarter companies. For example, the Note does not discuss “gross income” as defined in section 1(1) or section 11(a) which, although not specifically referring to headquarter companies, are applicable to headquarter companies.

Comments on both notes must be submitted to SARS by May 31, 2015.