You will have to work out the "customs value" in New Zealand dollars of goods you sell to work out if you should charge GST on sales of low-value goods imported into New Zealand. To do this you may need to convert your currency to NZ dollars.
What the customs value is
The value of an imported item is the price the item is sold for. This does not include any amounts charged by the supplier for:
- GST charged on the supply of the item
- duty payable by the supplier under the Customs and Excise Act 2018
- the cost of international transport and associated insurance of the item between leaving the country of export and being delivered in New Zealand.
When currency conversion to New Zealand dollars is necessary
- If it is unclear whether a good you sell in another currency has a customs value exceeding NZ$1,000 or not.
- If you have not chosen to charge GST on supplies of high-value goods (goods with a customs value above $1,000).
What exchange rate you should use
Overseas suppliers may use any one of the following exchange rates:
- the spot exchange rate applying at the time of supply
- the rate published by the New Zealand Customs Service
- the Reserve Bank of New Zealand (RBNZ) rate, or a reference rate published by another central bank
- an exchange rate provided by a foreign exchange organisation or foreign exchange data vendor.
Exchange rate means the unit of foreign currency per New Zealand dollar, published within 30 calendar days of the conversion time. The practice for sourcing the rate must be consistent if a rate is used other than the:
- spot exchange rate that applies at the time of supply
- most recently published rate is used.
Apart from the requirement that your chosen exchange rate be used consistently, there are no restrictions on the specific type of exchange rate that you may use for converting foreign currency amounts. This means you have a choice of using a sell NZD rate, a buy NZD rate or a midpoint rate when converting foreign currency amounts to establish whether GST applies.
Currency conversion formula
You convert foreign currency to New Zealand dollars using the following formula:
(Amount expressed in a foreign currency) / (the supplier's chosen exchange rate on the conversion day)
Sourcing exchange rates and updating business systems
You may set a schedule to update your business systems with your chosen rate. This schedule must make sure rates will be updated at consistent and regular intervals, no more than 30 calendar days apart. You cannot test and select a more favourable exchange rate at other times or decide not to accept the published rate at a scheduled time.
You may only change the exchange rate you use, or your schedule for sourcing and updating the exchange rate in your systems if you have sound commercial reasons for doing so. If you change the exchange rate you use with the purpose of affecting whether goods are low value goods, you will not have used the rate consistently and, will not have followed the requirements. However, different exchange rates may be used for distinct parts of your business, provided the exchange rate chosen for each respective part of the business is used consistently within that part.
Currency conversion when determining the amount of GST payable
You will also need to use amounts in NZ currency when filing your GST return. You will need to convert your sales of low-value goods to NZ customers into NZ dollars for each return you file.
You can use the exchange rate applying at:
- the time of supply
- the last day of the relevant taxable period
- the date the supplier files their return for the relevant period, or the due date for filing, if the return is filed past the due date
- another date as agreed with the Commissioner of Inland Revenue.
If you have chosen to not show amounts in New Zealand currency at the time of supply, you cannot change it for a period of 24 months after you made that choice, unless agreed otherwise with us.
When working out the amount in New Zealand dollars to include in your GST return, you may use a sell NZD rate, a buy NZD rate or a midpoint rate.
Conversion to determine if goods are low-value
Witte Fashion Co. (Witte) is a non-resident merchant that supplies high-end clothing. They sell a suit valued at AU$880 to Gordon, plus AU$50 for shipping to Gordon's address in Wellington, New Zealand.
At the time of the sale to Gordon, the midpoint exchange rate used in Witte's systems for estimating the customs value of items sold is AU$0.9270 to NZ$1. Based on this, Witte determines that the estimated customs value of the suit in New Zealand dollars is NZ$949.30 (AU$880 / AU$0.9270 = NZ$949.30).
As the estimated customs value is less than NZ$1,000, the suit is a low-value good. Witte charges Gordon GST of AU$139.50 (AU$930 x 15% = AU$139.50).