{UAH} TAXATION OF FOREX GAINS & LOSSES
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TAXATION OF FOREX GAINS & LOSSES
The Ugandan shilling has in the last year or so, faced sharp declines against foreign currencies. In times like this where we have experienced a sustained volatility in foreign exchange, understanding the tax implications of Forex gains and losses is particularly important for businesses.
Basically, if you do business in foreign currency and the amounts in the business transaction are payable or receivable in the future, please note that you will be exposed to the effect of foreign exchange fluctuations. HOW? If the relevant exchange rate is different at the time the amounts are actually paid or received, exchange gains or losses will arise.
The income tax law provides the following rules on how these gains or losses should be treated for tax purposes.
1) Forex gains should be included in your gross income. It becomes taxable just like a trading profit.
2) Forex losses should be included in your expenses. It becomes allowable just like as any other business expense.
3) Forex gains and losses can only be taxable or deductible if realised. They are considered realised when the foreign currencies are actually converted into or exchanged for the Uganda shilling or vice versa.
4) Unrealised Forex losses or gains are not deductible or taxable for tax purposes. They are merely estimated gains or losses.
Do not leave out these amounts when preparing your accounts or when filing tax returns to URA.
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-- The Ugandan shilling has in the last year or so, faced sharp declines against foreign currencies. In times like this where we have experienced a sustained volatility in foreign exchange, understanding the tax implications of Forex gains and losses is particularly important for businesses.
Basically, if you do business in foreign currency and the amounts in the business transaction are payable or receivable in the future, please note that you will be exposed to the effect of foreign exchange fluctuations. HOW? If the relevant exchange rate is different at the time the amounts are actually paid or received, exchange gains or losses will arise.
The income tax law provides the following rules on how these gains or losses should be treated for tax purposes.
1) Forex gains should be included in your gross income. It becomes taxable just like a trading profit.
2) Forex losses should be included in your expenses. It becomes allowable just like as any other business expense.
3) Forex gains and losses can only be taxable or deductible if realised. They are considered realised when the foreign currencies are actually converted into or exchanged for the Uganda shilling or vice versa.
4) Unrealised Forex losses or gains are not deductible or taxable for tax purposes. They are merely estimated gains or losses.
Do not leave out these amounts when preparing your accounts or when filing tax returns to URA.
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"When a man is stung by a bee, he doesn't set off to destroy all beehives"
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