For the 2014 tax year, these are the CGT rules for both legal entities and individuals who own overseas investents in foreign currency
For all disposals after 1 March 2013, the CGT calculation for offshore investments in respect of individuals and non-trading trust will be dealt with differently to a company or trading trust.
1. For an individual and trusts – work out the gain in the foreign currency and then convert to Rand at the rate applying in the year of disposal.
2. For legal entities – work out the gain by converting the foreign currency to Rand, both in the year of acquisition and in the year of disposal (therefore getting taxed on the currency gain as well in the process).
So what SARS is doing, they’re simplifying the calculation for individuals and non-trading trusts by removing the foreign currency movement in the CGT calculation.
These changes will reflect in the tax certificates issued for the 2013/2014 tax year.
Translation of foreign proceeds into Rand
1. Individuals and legal entities can elect the spot rate on the date of disposal of the asset or
the average exchange rate for the year of assessment in which the asset was disposed, to convert the realised gains/losses as a result of the disposal of a foreign unit trust investment.
2. The taxpayer has to be consistent in his choice within a particular year of assessment
In other words, gains/losses in one fund cannot be translated at average rate and the gains/losses from the next fund at spot rate, or vice versa
3. Some investment firms currently apply the spot rate to convert from fund based currency to Rands in order to reflect the gains/losses for the period in Rands.