Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Tax credits and other credits - Tax credits relating to attributed controlled foreign company income

LK 3: Currency conversion

You could also call this:

“How to convert foreign tax paid by a controlled foreign company into New Zealand dollars”

When a controlled foreign company (CFC) pays or owes foreign income tax in a currency that’s not New Zealand dollars, you need to change it into New Zealand dollars. You can do this in two ways:

You can use the exchange rate from the day when the tax is paid or becomes due. This is called the close of trading spot exchange rate.

Or, you can use an average of exchange rates. You look at the exchange rate on the 15th day of each full month in the period that the CFC’s income relates to. Then you take the average of these rates.

You get to choose which of these two methods you want to use to convert the foreign currency into New Zealand dollars.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518144.

Topics:
Money and consumer rights > Taxes
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LK 2: Calculation of amount of credit, or

“How to work out your foreign tax credit amount”

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LK 4: Use of remaining credits, or

“How to use leftover tax credits in future years”

Part L Tax credits and other credits
Tax credits relating to attributed controlled foreign company income

LK 3Currency conversion

  1. If foreign income tax is paid or payable by a CFC in a currency other than New Zealand currency, the amount must be converted into New Zealand currency by applying—

  2. the close of trading spot exchange rate on the date when the income tax is paid or becomes payable; or
    1. the average of the close of trading spot exchange rates for the 15th day of each complete month that falls in the period to which the attributed CFC income relates.

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