(2021) How is employment income in foreign currency converted?

If you receive your wages in a foreign currency, you must convert the income into Euro for the income tax return. If taxes were withheld abroad, you must also convert these into Euro for crediting against the tax liability. The Federal Fiscal Court has clarified how this should be done (BFH ruling of 03.12.2009, BStBl. 2010 II p. 698).

• The conversion is carried out according to the cash basis principle in accordance with § 11 para. 1 EStG at the time of receipt. For wages, this is when the salary is credited to the bank account.

• The conversion of income must be done using the Euro reference rate of the European Central Bank, specifically the monthly average rates. These Euro reference rates correspond to the VAT conversion rates set monthly by the Federal Ministry of Finance and published in the Federal Tax Gazette I.

The tax authorities do not apply these BFH requirements to cross-border commuters to Switzerland. Instead, they should enter both their wages and the Swiss withholding tax in Swiss Francs in the "Anlage N-Gre" of their tax return. The tax offices then convert these amounts on an annual basis - not monthly! - into Euro. They use an average annual amount specified by the tax authorities. For 2020, the tax authorities specified the annual conversion rate for the tax assessment as 93.00 Euro for 100 CHF. For 2021, the rate was not known at the editorial deadline.