Abstract:
This paper aims to analyze the tax consequences of foreign exchange
differences. The taxpayers can choose the method of determining exchange
differences for tax purposes according to tax law or according to accounting
law. The application of each method has its advantages as well as
disadvantages, and the choice of a better method for the taxpayer should be
based on a detailed analysis of his business activities and potential future
economic events. In business practice certain economic events may result in
recognition or irrelevance of such exchange differences for tax purposes, such
as a waiver of or change of the currency of a liability. If foreign exchange
gains are not recognized for tax purposes, for the taxpayer this would mean
tax savings.