Changed BMF position on foreign exchange gains on capital claims

March 7, 2025

According to the new interpretation of the tax authorities, an interest-bearing investment in a foreign currency is also a capital claim in accordance with § 20 (2) no. 7 EStG.

Consequently, this capital claim in foreign currency – and in this respect basically the same as for an investment in EUR – can lead to a profit if the repayment amount exceeds the amount invested (§ 20 (2) no. 7 EStG).

However, such a profit is generally excluded in the case of a capital claim in EUR, since this capital claim is settled in EUR without change upon repayment.

In contrast to this, the tax authorities now calculate various EUR values of the foreign currency claim for tax calculation purposes. First, the capital claim in EUR is calculated at the time of the capital investment and then at the time of repayment. According to the administrative view, this exclusively technical conversion leads to a positive or negative result, even without realisation. In the opinion of the BMF, this result is now taxable. The actual exchange of the currency into EUR is no longer relevant.

This understanding is now being followed by banks.

In the amendment dated 11 July 2023, the BMF stipulates that this amended view should be applied to capital claims that were ‘acquired’ on or after 1 January 2025. Consequently, the earlier view is still to be applied to old loans (acquired before 1 January 2025).

This interpretation also means that unrealised losses are also to be taken into account for tax purposes. The revised administrative interpretation thus primarily results in a considerable amount of additional red tape, as the conversion will never lead to a ‘zero’ result.