NEW ZEALAND GAZETTE

No. 204

Determination G6B: Foreign Currency Rates in the replacement of paragraph 6 (3) (b) (ii) only. The new paragraph 6 (3) (b) (ii), which sets out the exchange rate to be used where a cashflow is converted, is as per paragraph 6 (4) (b) (ii) in Determination G6A: Foreign Currency Rates.

This determination applies where, for the purpose of calculating the income or expenditure of a person in respect of a financial arrangement denominated in a foreign currency, it is necessary to establish the rate in New Zealand currency of a foreign currency. This will be required in the circumstances outlined in clause 3 of this determination.

This determination sets out the approved markets, sources of information and method, to be used for determining the rate for foreign currency conversion.

2. Reference

This determination is made pursuant to section 64E (1) (a) to (f) and 64F of the Income Tax Act 1976.

This determination revokes and replaces Determination G6B: Foreign Currency Rates, made on 23 April 1990.

3. Scope of Determination

This determination applies where it is necessary for the purposes of sections 64B to 64M of the Income Tax Act 1976 to ascertain the value in New Zealand currency of:

(a) A cashflow paid or received in a foreign currency under a financial arrangement; or

(b) A financial arrangement denominated in a foreign currency using a method that has regard to market valuation; or

(c) In any other circumstances, an amount expressed in foreign currency.

4. Principle

(1) Markets in foreign currencies are approved having regard to the following criteria—

(a) The number of participants in the market or having access to the market;

(b) Frequency of trading in the market;

(c) The nature of trading in the market—how the rate for the foreign currency is determined and how the foreign currency is traded on the market;

(d) The potential or demonstrated capacity of a person or group of persons to significantly influence the market;

(e) Significant barriers to entry;

(f) Discrimination on the basis of the quantity bought and sold unless based on the risks involved or the transaction costs or economies of scale.

(2) Sources of information for foreign currency rates are approved having regard to the following criteria—

(a) Reliance on the sources of information by participants in the market;

(b) The accessibility of the sources of information for participants in the market.

(3) Methods of obtaining a rate for foreign currency at the end of the income year for the purposes of valuing a financial arrangement are approved if—

(a) The rate is obtained at the cut-off time; and

(b) The method for determining the cut-off time adopted by a person will be consistently applied in respect of each income year.

5. Interpretation

(1) In this determination, unless the context otherwise requires—

Expressions used, except the expression “income year”, have the same meanings as in sections 2 and 64B to 64M of the Income Tax Act 1976:

“Approved foreign exchange dealer” means a foreign exchange dealer that is a registered bank for the purposes of the Reserve Bank Act 1989 and is active in the market:

“Contributor page” means a page of information provided by an approved foreign exchange dealer that is displayed on a screen provided by Reuters New Zealand Limited or Telrate New Zealand Limited.

“Cut-off time”, in relation to a person and an income year, means the time at the end of the income year when all financial arrangements held or issued by the person are valued in order to determine the assessable income of the person for the income year:

“Forward contract” means a contract, other than a futures contract traded on any futures market or a spot contract, for the sale or purchase of a foreign currency for delivery at a specified future time:

“Futures contract” means a contract traded on the New Zealand Futures Exchange:

“Income year” means—

(a) Where a taxpayer furnishes a return of income under section 15 of the Income Tax Act 1976 for an accounting year ending with an annual balance date other than the 31st day of March, the annual accounting period ending on that balance date:

(b) In respect of the income of any other person, the year in which that income has been derived by that person:

“New Zealand foreign currency market” means the market in spot contracts and forward contracts:

“Spot contract” means a contract for the sale or purchase of a foreign currency for delivery in 2 days:

“Multicontributor page” means a multicontributor page of information that is displayed on a screen provided by Reuters New Zealand Limited or Telrate New Zealand Limited.

(2) Any reference in this determination to another determination made by the Commissioner shall be construed as referring to any fresh determination made by the Commissioner to vary, rescind, restrict, or extend that determination.

6. Method

(1) Approved markets—The New Zealand foreign currency market in European Currency Units and in the currencies of the following countries and territories are approved—

Japan
Canada
French Republic
The Territory of Hong Kong
Commonwealth of Australia
Republic of Singapore
The Swiss Confederation
Federal Republic of Germany
The United States of America
Kingdom of the Netherlands
United Kingdom of Great Britain and Northern Ireland
The Federation of Malaysia
The Independent State of Papua New Guinea
Republic of Ireland
Portuguese Republic
Republic of Austria
Kingdom of Sweden
Kingdom of Denmark
Republic of Italy
Kingdom of Norway
Kingdom of Spain
Republic of Turkey
The Hellenic Republic
Finland

(2) Sources of Information—The following sources of information for foreign currency rates are approved—

(a) In relation to spot contracts, a multicontributor page that quotes rates for spot contracts:

(b) In relation to forward contracts, a multicontributor page