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South Africa: “Rental income” to include foreign exchange gains

South Africa: Rental income, foreign exchange gains

The 2019 Taxation Laws Amendment Bill (released 30 October 2019) includes a proposed change to the definition of “rental income” under section 25BB of the tax law.


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Under this measure, “rental income” would now include foreign exchange gains that relate to exchange items serving as a hedge in respect of “property income” (also a proposed definition change). Under these measures, property income would include the following items:

  • Amounts received or accrued in respect of the use of immovable property
  • A dividend from a company that is a real estate investment trust (REIT) at the time of distribution of that dividend
  • A qualifying distribution from a company that is a controlled company at the time of that distribution
  • A dividend or a foreign dividend from a company that is a property company at the time of that distribution
  • Any amount recovered in terms of section 8(4) in respect of an amount previously deducted pursuant to other sections

KPMG observation

The proposed inclusion of these foreign exchange gains in the definition of “rental income” aims to provide relief for REITs or controlled companies hedging property income-related items. This proposal, however, may only provide limited relief given that exchange differences relating to the financing of immovable property would not be taken into account for purposes of calculating “rental income.”

Read a November 2019 report [PDF 309 KB] prepared by the KPMG member firm in South Africa

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