FinMin wants to soften the blow of the FX crunch on the books: The Finance Ministry wants to change the way businesses calculate their foreign exchange costs to determine their tax base, according to a resolution published in the Official Gazette.

What does it mean? The decision seeks to account for the price differences between the FX rates on the official and parallel markets throughout the previous year, targeting companies whose operations necessitate the use of foreign currency, with a specific focus on importers and exporters.

The new regs have been brewing for at least a couple of weeks: Enterprise was the first to report last month that the government was putting together new rules that would enable companies to account for FX price differentials from the volatile exchange rate. The difference between the official and parallel market exchange rates throughout 2023 was calculated at an average of 26.64%, a source at the Tax Authority told us.

In detail: The accounting scheme will augment FX costs booked by companies throughout 2023 by the following percentages:

  • January-April: 9%
  • May-August: 24%
  • September-October: 34%
  • November-December: 60%

But the rules come with strings attached: The FinMin intends to apply the scheme only to the difference between FX revenues generated from exports and FX costs arising from imports in a bid to discourage companies from selling foreign currency on the black market, one source said. The rules also don’t apply to the official list of goods — including fuel, wheat, and meds — seeing companies are able to source USD at the official rate for such purchases.

What’s next? The Finance Ministry and central bank officials will meet today to set the mechanism by which the new rules will be implemented and iron out the legal details, our source said. The decision will not go into effect until both parties agree on a framework.

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