In Ghana, the taxation of exchange gains and losses is governed by the Income Tax Act, 2015 (Act 896), as amended by the Income Tax (Amendment) (No. 2) Act, 2022 (Act 1094). The key provisions are as follows:
Exchange Gains
- Taxable Status: Exchange gains are considered taxable income, regardless of whether they are realised or unrealised. This means that even if a business has not yet settled a foreign currency transaction, any gain arising from changes in exchange rates must be included in the taxable income for the year.
Exchange Losses
- Deductibility: Exchange losses are deductible only if they are realised. A loss is realised when a liability in foreign currency is settled or when the right to receive foreign currency is satisfied by actual receipt. Unrealised exchange losses are not deductible.
- Deduction Limit: The amount of exchange loss that can be deducted is limited to the sum of:
- The total exchange gain earned by the taxpayer during the year.
- Fifty percent (50%) of the chargeable income calculated as if no exchange gain or loss had occurred
- Any exchange loss exceeding this limit cannot be deducted in the current year. Such excess losses may be carried forward for up to five years. If not utilised within this period, the right to deduct the loss expires.
Realisation of Assets and Liabilities
- Filing Requirement: A person who realises an asset or liability must submit a return to the Commissioner-General of the Ghana Revenue Authority (GRA) within 30 days after the realisation. This applies to both exchange gains and losses.
These provisions aim to align tax treatment with actual economic events, ensuring that businesses are taxed on realised gains and losses, thereby promoting fairness and consistency in the tax system.
For more detailed information, you can refer to the official Income Tax (Amendment) Act, 2023 (Act 1094).