The Federal Inland Revenue Service (FIRS) has issued a clarification on relevant adjustments that may henceforth be required to determine the tax position from foreign currency (FCY) transactions.
The clarification was contained in an information circular to taxpayers, tax practitioners and tax officials and the public on the appropriate tax treatment of FCY transactions in line with the provisions of the relevant tax laws.
The service noted that the International Financial Reporting Standards (IFRS) prescribed the treatment of FCY transactions in the financial statements of an entity for accounting purposes.
It said though the treatment prescribed by the IFRS may be sufficient for accounting purposes, such treatments may not be in accordance with extant tax rules, which would necessitate making relevant adjustments when computing tax payable.
The revenue agency pointed out that generally, only expenses that are wholly, exclusively, necessarily and reasonably incurred in the production of a taxable income may be deducted to ascertain the assessable profits for the relevant year of assessment.
