imported>Doug Williamson |
imported>Doug Williamson |
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| ''Foreign exchange''.
| | A tax which is levied on a taxpayer who is intended to suffer the final burden of paying tax. |
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| A 'direct' quote is a foreign exchange rate quotation where fixed amounts of the foreign currency are expressed as variable amounts of the domestic currency.<br />
| | Examples include corporation tax and income tax. |
| This means that the amount of foreign currency is <u>multiplied</u> by the given exchange rate, to obtain the domestic currency equivalent.
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| <b>Example 1</b><br />
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| Our domestic currency is USD.<br />
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| The exchange rate with EUR is quoted as:<br />
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| EUR/USD 1.0986
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| From the perspective of USD, this is a direct quote.<br />
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| It means EUR 1 = 1.0986 USD.
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| As a USD-domiciled person, we multiply by the quoted rate of 1.0986, to work out our domestic currency (USD) equivalent.
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| Say we need to exchange EUR 100,000.
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| EUR 100,000 would be exchanged for:<br />
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| USD 100,000 x 1.0986<br />
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| = USD 109,860.
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| <b>Direct or indirect</b><br />
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| Whether any given FX quotation is 'direct' or 'indirect' depends on our perspective. <br />
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| It depends what our domestic currency is.
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| <b>Example 2</b><br />
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| From the perspective of a EUR-domiciled person, the quote:
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| EUR/USD 1.0986
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| is an indirect quote.
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| It means EUR 1 = 1.0986 USD.<br />
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| A EUR-domiciled person would divide by this rate, in order to obtain their domestic currency (EUR) equivalent of a USD amount.
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| For example:<br />
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| USD 109,860 / 1.0986<br />
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| = EUR 100,000
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| <b>Example 3</b><br />
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| In this example we are a GBP-domiciled person.<br />
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| From our perspective, the rate with USD quoted as:
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| USD/GBP 0.6539
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| is a direct quote.
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| It means USD 1 = 0.6539 GBP.
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| As a GBP-domiciled person, we would <u>multiply</u> by this rate to work out our domestic currency (GBP) equivalent of a USD amount.
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| For example:<br />
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| USD 100,000 x 0.6539<br />
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| = GBP 65,390
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| == See also == | | == See also == |
| *[[Base currency]] = fixed currency | | * [[Her Majesty’s Revenue & Customs]] |
| *[[Foreign exchange rate]] | | * [[Corporation Tax]] |
| *[[Indirect quote]] | | * [[Direct costs]] |
| *[[Quoted currency]] | | * [[Income Tax]] |
| *[[USD]] | | * [[Tax]] |
| *[[Variable currency]] | | * [[Indirect tax]] |
| | | * [[Inland Revenue]] |
| | | * [[Withholding tax]] |
| == Other resource ==
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| [[Media:June_16_TT_Base_jumper.pdf| Base jumper - applying direct and indirect exchange rate quotes, The Treasurer]] | |
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| [[Category:Manage_risks]] | | [[Category:Accounting,_tax_and_regulation]] |
| [[Category:Trade_finance]]
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