Taxation of foreign currency deposits
February 24, 2011 | 30,00 EUR | answered by Oliver Burchardt
Dear Sir or Madam,
I have a question regarding the taxation of foreign currency balances.
Case example:
On 01.04.2010, a USD account is opened with an initial balance of 0 USD.
On 05.04.2010, a USD stock package is purchased. The purchase price is 1000 USD, resulting in a balance of -1000 USD.
On 08.04.2010, the account is balanced by converting 800 Euros.
On 01.07.2010, the USD stocks are sold for 1100 USD and credited to the USD account.
On 04.07.2010, the USD balance is converted to Euros.
I understand that the stock transaction is considered a private capital transaction.
But what about the foreign currency balance?
On 01.07.2010, 1100 USD are acquired through the sale of the stocks and sold 3 days later. This would constitute a private capital transaction.
But what happens when purchasing the stocks if the account is in a negative balance due to the purchase and then balanced 3 days later?
Best regards,
Dear inquirer,
Thank you for your inquiry, which I am happy to answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided. Changing, adding, or omitting information can affect the tax result.
The tax authorities generally treat foreign currency balances as assets subject to the rules on private sales transactions. Therefore, you must subject the profit or loss from the sale of foreign currency through conversion into Euros to taxation.
When acquiring shares at the expense of an initially uncovered foreign currency account, you ultimately incur a liability in foreign currency. You settle this liability 3 days later. The tax authorities do not view this as a taxable transaction, as per the letter from the Federal Ministry of Finance dated 25.10.2004, Ref: IV C 3 - S 2256 - 238/04, paragraph 44.
I hope that my explanations have been helpful to you.
Best regards,
Oliver Burchardt
Tax consultant
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