Ask a tax advisor on the topic of Capital assets

Deduction of interest on debt, treatment of currency gains/losses

January 13, 2011 | 30,00 EUR | answered by Oliver Burchardt

I am considering taking out a loan in Swiss Francs as a private individual. The equivalent amount exchanged in Euro will be used to generate income through investment in bonds, stocks, certificates, etc. The Swiss Franc loan will be repaid later through a reverse exchange.

Question:
Can the Swiss Franc interest expenses be deducted as advertising costs from the Euro income, and how is the tax treatment of any gains/losses from the currency exchange during repayment.

Thank you very much!

Oliver Burchardt

Dear inquirer,

Thank you for your inquiry, which I am happy to answer as part of an initial consultation.

The tax assessment is based on the information provided. Changing, adding, or omitting information may result in a different tax assessment.

Due to the introduction of the flat tax, a deduction of advertising costs for income from capital assets is no longer possible. The interest expenses from the loan, therefore, cannot be taken into account for tax purposes, regardless of the currency.

Due to the prohibition of deducting advertising costs, later currency losses are also not deductible. There is currently no regulation for profits from such currency effects. I am of the opinion that due to the lack of deduction possibility, consideration as income is also not possible, as this would otherwise violate the principle of taxation according to ability to pay.

I hope that my explanations have been helpful to you.

Best regards,

Oliver Burchardt
Tax advisor