Treatment of Foreign Exchange Losses

Realised foreign exchange losses are tax deductible when they arise from the discharge of trade receivables, and Foreign exchange losses realized through the conversion of debt to equity are tax deductible under Section 4A of the Income Tax Act (ITA), which allows for the deduction of foreign exchange gains or losses realized on or after 1st January 1989 in the computation of taxable income for a business carried on in Kenya.