German taxation of foreign interest bearing account

[PandaMunich]

Does this cooling off period apply to all types of incoming funds? Example:
We (husband and I) will be receiving private pension and state pension payments into our UK GBP account. We will need to transfer those funds fairly regularly into our EUR denominated German account. Does such a transfer then lead to the need to calculate currency gains/ losses if it is done within 12 months after receipt of such funds?

No, since that was income "earned in GBP".

It is not clear to me as to whether "incoming funds" means (i) funds which were converted from EUR to a foreign currency (and then at some point converted back from such foreign currency into EUR) or (ii) funds/ income in such foreign currency entering the foreign account (and at a later stage transferred into EUR.)

Only the former.
Your case is the latter, all your GBP were "earned in GBP", i.e. there was no purchase of GBP.

This part of the Brandis/Heuermann (Brandis is a judge and Heuermann a retired judge of Germany's highest financial court, the BFH) "Ertragsteuerrecht" commentary on § 23 EStG in Randziffer 194 allows you to ignore those amounts:

• Fremdwährungsbeträge, die aus Forderungen gegen Dritte resultieren (Lohn- u. Kaufpreisforderungen, Zinsforderungen, Dividenden u. ä.) können mangels Anschaffung i. S. d. Abs. 1 Satz 1 Nr. 2 kein steuerbares privates Veräußerungsgeschäft auslösen. So sind beispielsweise auf dem Fremdwährungskonto gutgeschriebene Zinsen keine „angeschaffte“ Valuta (zutr. BMF v. 25.10.04,BStBl I 04, 1034 Tz. 42).
  Umgekehrt ist auch die Verwendung von Fremdwährungsbeträgen zur Erfüllung von Verbindlichkeiten (vertragl. [Rückzahlungs-]Verpflichtungen) und generell für Ausgaben der privaten Lebensführung kein steuerbarer Vorgang (→ Rn. 196).

• Foreign currency amounts resulting from receivables from third parties (wage and purchase price receivables, interest receivables, dividends, etc.) cannot trigger a taxable private sale transaction in the absence of acquisition within the meaning of para. 1 sentence 1 no. 2. For example, interest credited to a foreign currency account is not an ‘acquired’ currency (see BMF of 25 October 2004, BStBl I 04, 1034 para. 42).
  Conversely, the use of foreign currency amounts to fulfil liabilities (contractual [repayment] obligations) and generally for private living expenses is also not a taxable transaction (→ para. 196).

Of course, this may change should the state change the rules again.
But as of now, you do not need to worry about money "earned in GBP" as long as that money is kept in a current account, there cannot be a currency speculation profit.
However, if that money earned in GBP should ever enter a savings account, it automatically gets assigned a fictive purchase price in € and you will start having to calculate currency profits.

[SilkeT]

Thanks Panda Munich, for the very detailed explanation! I had already started building yet another xls model in my mind. Glad I can offload that now.

[kiplette]

A brokerage account is not a current account.

I think I have a vague handle on this change from 2024 - we only have a current account in the UK and the money in it was always quids, so when we move it into €, all is good.

I have tried to explain to the keenly investing kids#3 and #4 that they need to be careful to do their investment through a German broker to avoid all of the nonsense with the currency speculation, but I have not really got the message across.

They use Trading 212.

Kid#4 has mostly € apart from Rolls Royce which is quids (and currently making a loss, hey ho)
Kid#3 has all sorts of stuff.

Does anyone know whether 212 is an OK platform for them to use, or whether they are going to be doing complicated calculations for their Elster returns?

If that is a bad one, can anyone recommend a German-safe and easy to use one?

I hope the question is clear - I only have the vaguest clue about this whole investment world anyway, let alone the complications with the new currency speculation rules

[Fraufruit]

"If that is a bad one, can anyone recommend a German-safe and easy to use one?"

You said you already advised them to invest in Germany and they didn't listen. In my experience, I can tell my son something twice and that is enough. He either takes it or he doesn't.

Remember how our parents tried to persuade us one way or the other? Over and over again.

Kudos to you for trying to help, though.

[PandaMunich]

They use Trading 212.

Kid#4 has mostly € apart from Rolls Royce which is quids (and currently making a loss, hey ho)
Kid#3 has all sorts of stuff.

Does anyone know whether 212 is an OK platform for them to use, or whether they are going to be doing complicated calculations for their Elster returns?

If they own funds (and they most probably do, e.g. ETF), they are in for a rude awakening when they will have to calculate the Vorabpauschale in Anlage KAP-INV of their now mandatory (because of that Trading212 investment!) German tax return, please see here: viewtopic.php?p=6031#p6031
and here: viewtopic.php?p=6086#p6086

For German alternatives to Trading212, please see here (they even pay 2.75% on Tagesgeld): viewtopic.php?p=6545#p6545

[kiplette]

Thanks chaps. This is going to be fun.

[panta_rei]

Scenario:

DE citizen & resident, owning shares in a US broker (RSU's resulting from work package compensation).

Shares are sold and cash (USD) gets deposited in US broker on July 1st, 2024. At that time, 1 USD = 0.9307 EUR.
No actual cash transfer/conversion takes place, everything stays in USD.

On September 2nd, US broker starts paying interests on uninvested cash.
Let's say it pays out 1000 USD.
On that day, 1 USD = 0.9041 EUR means that a capital gain of 904.1 EUR is realized, to be declared in 2025.

If those 1000 USD had been converted to EUR on 31.12.24 (1 USD = 0.9626 EUR), they would have been worth 962.6 EUR.
That would have represent an actual currency gain of 962.6 - 904.1 = 58.5 EUR to be declared separately in 2025 in the KAP (or is it SO?).

Question 1: is this correct so far?
Question 2: if the USD are not converted to EUR, a fictitious currency gain is still calculated. Right?
Question 2b: But then, how is this fictitious currency gain determined? In particular, what points in time are used to determine it?

[kiplette]

For German alternatives to Trading212,

OK, currently starting to look at this with kid#4, he was looking at the two recommended in the other thread, but then on checking, he thinks Trading 212 is German and there should be no problem. The website blurb mentions that 212 do the tax thing. We are not completely sure if we are understanding it correctly. Maybe only German shares and not foreign ones. His are specific companies, not ETFs, which may make the whole thing irrelevant.

He is hoping to start his Elster journey tomorrow, so that's something to look forward to.

[PandaMunich]

OK, currently starting to look at this with kid#4, he was looking at the two recommended in the other thread, but then on checking, he thinks Trading 212 is German and there should be no problem.

He should think again: https://praxistipps.focus.de/trading-21 ... ste_132931

[kiplette]

Thank you.

[dstanners]

I've found scalable capital pretty easy. It's a German site and it does a tax summary for my accountant.

They have just started a requirement for me to access it via an "app" on my phone rather than via my laptop, which I find a complete pain, but I guess the youth might even prefer it.

[kiplette]

Thanks, dstanners - yup, indeed, app-based is all they would consider

He was about to transfer his current portfolio yesterday, when he realised that he's left his tax ID at his work base, which blows the plan of starting Elster this week as well.

Hey ho. Baby steps. At least he is persuaded.

[PandaMunich]

Doing the income tax return in ELSTER is a pain.
--> he should buy the commercial buhl tax software instead (it allows doing up to 5 tax returns, so that's your whole family sorted, if you also want to file): https://www.idealo.de/preisvergleich/Of ... -buhl.html