Hi all,
Just dropping in some information on this new taxation that got lost from TT's demise. The wayback machine linked to above only has one page - and the following appeared several pages later. I remember thinking when I saved it: some day, TT won't be here, and I'll need this.
Nevertheless I am still incredibly baffled by how to go about calculating the currency gain/loss using the FIFO method mentioned. Is there some sort of app where you can plug in the numbers, perhaps? Excel is mentioned, but I'm an artsy-fartsy, never used such a thing, ever...
So here goes with the info. I hope it formats OK.
If you don't feel like reading the below long explanation, here's what you need to do:
By the end of 2023, get rid of all your non-€ accounts outside Germany that pay interest - except for current accounts, no matter whether they pay interest or not, those you get to keep.
But take care to let the money in those non-€ current accounts outside Germany "cool off" for more than 1 year, i.e. only "use" a batch of money after more than 1 year has passed since that batch of money entered the current account.
If you have a non-€ fixed-term deposit outside Germany which will only end at some point after 01.01.2024, don't worry, it still falls under the much more advantageous "old" rule, only fixed-term deposits with a starting date on or after 01.01.2024 will fall under the "new" rule.
However, as soon as this "old" (= from 2023 or earlier) deposit ends, do not prolong it, but either move the money into a current account and don't touch it for more than 1 year, or should you want to enter into another non-€ fixed-term deposit (Festgeld) or you want to keep the money in a direct access savings account (Tagesgeld), do so in a German bank/broker.
>silty1 wrote: For one thing, it looks like I can't take advantage of bringing home funds before the end of the year as you advise, because upon closer inspection of some GICs I took out in Canada only a few months ago, half of the funds are in a 2-year non-redeemable, with interest paid annually, maturing only in March, 2025. The rest is in a one-year.
You didn't read what I wrote attentively.
In my first post, I wrote:
If you have a non-€ fixed-term deposit outside Germany which will only end at some point after 01.01.2024, don't worry, it still falls under the much more advantageous "old" rule, only fixed-term deposits with a starting date on or after 01.01.2024 will fall under the "new" rule.
However, as soon as this "old" (= from 2023 or earlier) deposit ends, do not prolong it, but either move the money into a current account and don't touch it for more than 1 year, or should you want to enter into another non-€ fixed-term deposit (Festgeld) or you want to keep the money in a direct access savings account (Tagesgeld), do so in a German bank/broker.
--> your pre-2024 GIC (which is what Canadians call fixed term deposits, if they are a bit more long term) will only a problem once they finish their term whenever that may be.
Then, you will have to decide whether you want to prolong them or want to move the money into a savings account, both actions will count as a "purchase of CAD".
Only if you then moved the money into a CAD current account and left it untouched in there for over a year, or if you immediately exchanged the CAD into € would you not have to calculate currency profits.
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Example of currency gain calculation necessary if you prolong your GIC:
You have 100,000 CAD invested.
Your GIC ends on 15.03.2024, it ran for 1 year and now pays out on 15.03.2024: 100,000 CAD * 4.6% = 4,600 CAD
The exchange rate on 15.03.2024 is 1€ = 1.5 CAD.
--> you declare the interest of 4,600 CAD / 1.5 CAD/€ = 3,066.67€ in your Anlage KAP 2024.
You prolong the 104,600 CAD for 1 year at 5% on 15.03.2024, i.e. the term will end on 15.03.2025.
On 15.03.2024, at the start of this GIC, you have to pretend that you exchanged 69,733.33€ into CAD, to get those 104,600 CAD (= 69,733.33€ * 1.5 CAD/€), that you just invested for another year.
--> you have to attach a "purchase price label" of 69,733.33€ to your "104,600 CAD GIC".
On 15.03.2025, when the GIC ends, the exchange rate is 1€ = 1.4 CAD.
--> you declare the interest of 104,600 CAD * 5% = 5,230 CAD, by converting it into € with the exchange rate valid on that day: 5,230 CAD/1.4 CAD/€ = 3,735.71€ your Anlage KAP 2025.
At the same time, you have to pretend that you exchanged the 104,600 CAD into € on 15.03.2025, with the then exchange rate 1€ = 1.4 CAD, i.e. that you received 74,714.29€ from this "pretend" exchange.
This is the "selling price label" that you attach to those 104,600 CAD.
--> you have to declare a currency profit of 4,980.96€ (= selling price - purchase price = 74,714.29€ - 69,733.33€) in your Anlage KAP 2025.
Repeat this process each time you prolong a GIC.
>I also took a closer look at it and notice that about 20% of the money used to buy the GICS was sitting in a savings account, not a current account. Do I have to figure out when that portion entered the savings account, note the exchange rate, and do a separate calculation of the gain or loss for that portion? I have no idea how to go about this. I've had the savings account for decades, with funds fluctuating a lot - mainly leftovers from a rental property.
You need to look at some FIFO examples:
https://blog.megaventory.com/what-is-fi ... anagement/
You have to attach a "purchase price in €" label to each CAD that enters your savings account (= Tagesgeld) and when that Canadian Dollar leaves the account again (it is assumed, that the "oldest" CAD leaves first), you have to look up the €/CAD exchange rate that is valid on that day (or just the average ECB exchange rate during that month) and attach a "selling price in €" to that Canadian Dollar.
--> the difference between "selling price in €" and the "purchase price in €" is the currency profit that you have to declare in Anlage KAP.
>If there is a large currency gain for the tax year, could any losses be claimed from other investments to offset it? Like selling a losing stock toward the end of the year? Are there any other deductions available?
Against a loss from selling funds (ETF, mutual funds, money market funds and so on), yes.
But not against a loss from selling stocks (Aktien), since losses from selling stocks can only be offset again profit from selling other stock, they are seen to be "captive" in a separate "pot" which only profits from selling stocks can enter, see here:
https://marcowenzel-de.translate.goog/w ... r_pto=wapp
For the entirety of your worldwide capital income (you have to declare and tax your worldwide capital income in Germany), there is the saver's tax free allowance (Sparer-Pauschbetrag) of 1,000€ (since 2023, until 2022 it was 801€).
That is all the "deduction" you get.
Ok, if you're married, so you also get to use your wife's Sparer-Pauschbetrag, if she didn't need it.
So a married couple will not pay tax on the first 2,000€ of their capital income.
>Similarly, if there is a currency loss to report, would it offset the sale of a winning stock?
Yes, since profits from the sale of stocks are - unlike losses from the sale of stock - not "captive" in a pot.
>Would it bring down taxable amount of any other income?
No, it is capital income and can only affect other parts of capital income.
Capital income in its entirety is in one "big pot", so if you end up with an overall loss in your "capital" category, e.g. because you had currency losses and losses from selling funds that year which were higher than your interest income, then that overall loss will not help you, it will not lower your pension income.
The overall capital loss will simply be automatically carried forward by the Finanzamt to the next year and should you have some positive capital income in that year, will lower it.
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>silty1 wrote: Why does one have to leave it in a current account to collect no interest for an entire year? What happens if after depositing funds from a maturing Canadian CD into my current account, I use some of it for travel within that one-year period?
If you do that, you will have to calculate your currency speculation profit (or loss) according to the FIFO (first in, first out) rule and declare it in Anlage SO.
With your money stemming from a CD (certificate of deposit), i.e. from a Festgeld, those CAD will have a "purchase price" (their value in €, calculated on the day on which your CD ended), so you can forget about the exception for "money earned in CAD" that I wrote about here:
https://www.toytowngermany.com/forum/to ... nt-3954438
Odds are, that the sum of all your total currency speculation profits and losses that calendar year will be under the 1,000€ limit (up to 2023: 600€) and that therefore you will not have to pay tax on your total currency speculation profit, but you will still have to calculate it.
Only if a batch of money is left to "cool off" for more than 1 year in a current account, no matter whether that current account pays interest or not, will you not have to calculate the currency speculation profit.
>silty1 wrote: An unlikely scenario, but for illustration purposes: if I put, say, 10,000 CAD from a maturing CD into a current account next year with the intention of leaving it there for a year, but after a week mistakenly use my bank card to buy 10 dollars worth of Tim Horton's coffee and doughnuts from that current account, will I have to do the currency speculation calculation on the entire 10,000?
No, only for the 10 CAD you spent.
And even that is "worst-case", i.e. only if that current account had been completely empty when the 10,000 CAD entered it and therefore these 10 CAD were actually spent from the "poisoned" 10,000 CAD that now have a "purchase price label in €" attached to them through having been in an interest-bearing savings account, since that was actually the "oldest" money in your current account.
This goes by "batch".
So if, for instance, you had already "cooled off" (batch of money that had spent more than 1 year in that current account) or that had been "earned in CAD", e.g. through a Canadian flat you own, i.e. "older" batches of money in that account, then your 10 CAD coffee will have been spent from that "older" unproblematic money.
--> no currency speculation profit to be calculated.
Remember, you have to keep the FIFO (first in, first out) order, i..e pretend that you spent the "oldest" money in that account first.
The "batches" of money do not mix.
Only if you spend so much that you actually "reach" that newest batch, those 10,000 CAD, will you have to calculate a currency speculation profit and even then only for the amount you "touched" by spending it (= which is seen by the Finanzamt as selling that CAD amount).
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