How is employment income in foreign currency converted?
If you receive your salary in a foreign currency, you must convert it into Euro for your income tax return. This also applies if taxes have been withheld abroad on the salary 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 salary is converted into Euro as soon as the payment is credited to your account (BFH ruling of 03.12.2009, 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: The salary must be converted using the monthly ECB reference rate. You can view the current conversion rates on the website of the Federal Ministry of Finance (see BMF conversion rates).
Facilitation: Annual conversion
It is not objected if salary payments in foreign currency are calculated based on an annual conversion rate. This rate is determined 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
A special regulation applies to cross-border commuters to Switzerland:
- You must enter the salary and the tax withheld in Switzerland in "Anlage N-Gre" in Swiss Francs. The tax offices will then automatically convert it on an annual basis.
- The tax authorities use an average rate for the entire year, which is specified.
Current conversion rates for Switzerland:
- 2022: 100 CHF = 99,00 EUR
- 2023: 100 CHF = 102,50 EUR
- 2024: 100 CHF = 104,50 EUR
- 2025: 100 CHF = 106,50 EUR
Source: Baden-Wuerttemberg tax offices.
Conclusion:
The conversion of salary in foreign currency is usually 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.
