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New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Calculation of FIF income or loss

EX 57: Conversion of foreign currency amounts: most methods

You could also call this:

“Changing foreign money to NZ dollars for overseas investments”

When you own something in another country that gives you income, and you’re using certain methods to figure out how much tax you owe, you need to change the foreign money into New Zealand dollars. This applies when you’re using methods like comparing values, looking at fair dividends, using set rates of return, or working out costs.

You have two choices for changing the foreign money into New Zealand dollars. You can either change each amount on the day you get it or on the day you work out its value. Or, you can change all the amounts using an average exchange rate. This average is based on the exchange rates on the 15th day of each month in the tax year.

Once you choose how you want to change the foreign money, you have to use the same way for all your overseas investments that use these methods. You also need to keep using this way in future tax years.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515681.

Topics:
Money and consumer rights > Taxes
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EX 56: Cost method, or

“How to calculate your FIF income using the cost method”

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EX 58: Additional FIF income or loss if CFC owns FIF, or

“Extra tax on overseas investments owned through foreign companies”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Calculation of FIF income or loss

EX 57Conversion of foreign currency amounts: most methods

  1. This section applies when—

  2. an amount in a foreign currency is the market value of, or is derived from or incurred on, an attributing interest in a FIF that a person has in an income year; and
    1. the person is using one of the following calculation methods (the relevant method) to calculate their FIF income or loss from the interest for the income year:
      1. the comparative value method:
        1. the fair dividend rate method:
          1. the deemed rate of return method:
            1. the cost method.

            2. The person must choose either that—

            3. each foreign currency amount in the income year is converted into New Zealand dollars using the exchange rate on the day for which the market value is determined or on which the amount is derived or incurred; or
              1. all foreign currency amounts in the income year are converted into New Zealand dollars at the average of the close of trading spot exchange rates for the 15th day of each month that falls in the income year.

                1. The election by the person must be applied for all attributing interests for which they use the relevant method for the income year and each later income year.

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