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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions - Definitions

EZ 49: Determination of core acquisition price where consideration for property denominated in foreign currency

You could also call this:

“Calculating the price in NZ dollars when buying items in foreign currency”

When you buy something and agree to pay for it in a foreign currency, you need to figure out how much it costs in New Zealand dollars. This is important for tax purposes. You have three options to choose from when converting the foreign currency to New Zealand dollars:

  1. You can use the exchange rate that a New Zealand bank offers on the day you made the deal. This rate would be for exchanging New Zealand dollars to the foreign currency on the day you’re supposed to get the item you’re buying.

  2. If you’re going to make the final payment within 5 years, you can use the exchange rate that a New Zealand bank offers on the day you made the deal. This rate would be for exchanging New Zealand dollars to the foreign currency on the day you’re supposed to make the final payment.

  3. You can use an exchange rate that the Commissioner of Inland Revenue approves for your specific situation. This approval would be given under section 90(1)(k) of the Tax Administration Act 1994.

Once you choose one of these options, you must stick with it for this specific deal every year when you do your taxes. If you’re not sure exactly when you’ll get the item or make the final payment, you should use the date that you and the seller expect these things to happen when you made the deal.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516233.

Topics:
Money and consumer rights > Taxes
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EZ 48: Definitions, or

“Explains key terms used in old financial arrangements rules”

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“Rules for fair pricing in financial transactions between connected parties”

Part E Timing and quantifying rules
Terminating provisions: Definitions

EZ 49Determination of core acquisition price where consideration for property denominated in foreign currency

  1. For the purposes of paragraph (c) of the definition of core acquisition price in section EZ 48, if the consideration payable under the relevant financial arrangement for the specified property is denominated in a foreign currency, the lowest price referred to in that paragraph must be the lowest price the parties would have agreed upon in that foreign currency converted into New Zealand dollars using, at the option of the taxpayer,—

  2. the rate, on the day on which the financial arrangement was entered into (in this section referred to as the contract date), available to the taxpayer from a New Zealand registered bank for the exchange of New Zealand dollars for that foreign currency on the day on which the first right in the specified property is to be transferred (in this section referred to as the rights date); or
    1. if the period between the rights date and the day on which final payment is to be made under the financial arrangement (in this section referred to as the settlement date) is not greater than 5 years, the rate, on the contract date, available to the taxpayer from a New Zealand registered bank for the exchange of New Zealand dollars for that foreign currency on the settlement date; or
      1. an exchange rate approved by the Commissioner for adoption under this subsection in the circumstances applicable to the taxpayer in a determination issued under section 90(1)(k) of the Tax Administration Act 1994.

        1. The rate adopted by a taxpayer in relation to a financial arrangement under subsection (1) must be consistently applied by that taxpayer in respect of that particular financial arrangement for the purposes of the old financial arrangements rules for every income year during its term.

        2. If the terms of the financial arrangement referred to in subsection (1) are such that the actual rights date is uncertain as at the contract date, then the rights date is for the purposes of subsection (1) the date on which it is reasonably expected by the parties at the time of entering into the financial arrangement that the first right in the specified property will be transferred.

        3. If the terms of the financial arrangement referred to in subsection (1) are such that the actual settlement date is uncertain as at the contract date, then the settlement date is for the purposes of subsection (1) the date on which it is reasonably expected by the parties at the time of entering into the financial arrangement that final payment will be made.

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