How is employment income in foreign currency converted?
If you receive your wages in a foreign currency, you must convert them into euros for your income tax return. This also applies if taxes have been withheld abroad on the wages and are to be credited against your German tax liability.
Conversion principles:
- Cash basis accounting (§ 11 para. 1 EStG): The conversion is made at the time of receipt. This means that the wages are converted into euros as soon as the salary is credited to your account (BFH ruling of 3.12.2009, BStBl. 2010 II p. 698).
- Euro reference rate of the European Central Bank (ECB): The conversion is based on the euro reference rate published monthly by the ECB. These rates correspond to the VAT conversion rates, which are also set monthly by the Federal Ministry of Finance and published in the Federal Tax Gazette.
- Monthly conversion: Wages must be converted using the monthly ECB reference rate. You can view the current conversion rates on the Federal Ministry of Finance website (see BMF conversion rates).
Facilitation: Annual conversion
It is not objected if wage payments in foreign currency are calculated based on an annual conversion rate. This rate is derived from the monthly VAT reference rates, rounded down to the nearest 50 cents (BMF letter of 14.12.2014).
Special regulation for cross-border commuters to Switzerland
For cross-border commuters to Switzerland, a special regulation applies:
- You must enter the wages and the tax withheld in Switzerland in the "Anlage N-Gre" in Swiss francs. The tax offices will then automatically convert them on an annual basis.
- The tax authorities use an average rate for the entire year, which is specified.
Current conversion rates for Switzerland:
- 2021: 100 CHF = 92.00 EUR
- 2022: 100 CHF = 99.00 EUR
- 2023: 100 CHF = 102.50 EUR
- 2024: 100 CHF = 105.00 EUR*
Source: Baden-Württemberg tax offices, *Note: The rate for 2024 has not yet been officially confirmed.
Conclusion:
The conversion of wages in foreign currency is generally done using the monthly euro reference rates of the ECB. Alternatively, the annual conversion rate can be used for facilitation. For cross-border commuters to Switzerland, the tax office handles the conversion using a specified annual average rate.
