New Zealand Gazette – 1996 – No. 131

Page 3223

✨ Income Tax Determination



SUPPLEMENT to

New Zealand Gazette

OF THURSDAY, 26 SEPTEMBER 1996

WELLINGTON: FRIDAY, 27 SEPTEMBER 1996 — ISSUE NO. 131

Departmental Notices

Inland Revenue

Income Tax Act 1976

Agreements for Sale and Purchase of Property Denominated in Foreign Currency: Exchange Rate to Determine the Acquisition Price and Method for Spreading Income and Expenditure

This Determination may be cited as “Determination G29: Agreements for Sale and Purchase of Property Denominated in Foreign Currency: Exchange Rate to Determine the Acquisition Price and method for spreading income and expenditure”.

  1. Explanation (which does not form part of this determination)

What financial arrangements does this determination apply to?

(1) This determination applies to any agreement for the sale and purchase of property (or ‘ASAP’) which is subject to the accrual rules, if the price for the property is denominated in a foreign currency (a ‘foreign currency ASAP’), and certain other conditions are met. It does not apply to a short term ASAP or a private or domestic ASAP (as those terms are defined in the Act), because these agreements are excepted financial arrangements.

General Principles of taxation of foreign currency ASAPs

(2) For all ASAPs (whether or not denominated in a foreign currency) which are subject to the accrual rules, you must calculate a core acquisition price. This is the total of:

(a) the lowest price that you and the other party would have agreed upon for the property at the time the ASAP was entered into, on the basis of payment in full at the time the first right in the specified property is to be transferred; or

if there is no such lowest price, the discounted value of the amounts payable for the property, calculated in accordance with Determination G21A; and

(b) any other amounts paid by the seller to the buyer (for purposes of explanation, these can safely be ignored).

(3) The difference, if any, between the NZ$ value of the core acquisition price (plus or minus certain non-contingent fees) and the NZ$ value of the amount paid by the buyer to the seller (the price) is income or expenditure, under the accrual rules. This difference may arise for a number of reasons:

(a) In the case of an ASAP where the price is fixed in NZ$, the reason for this difference will generally be the time value of money. If the buyer pays in advance for the goods, the buyer will often require a discount from the cash price. If the buyer pays on a deferred basis, the seller will often require an additional amount as compensation for the deferral. This can be equivalent to:

• a loan from the buyer to the seller in the case of a pre-



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💰 Determination G29: Agreements for Sale and Purchase of Property Denominated in Foreign Currency

💰 Finance & Revenue
Income Tax, Foreign Currency, Property Transactions, Financial Arrangements, Accrual Rules