Capital gains/losses on foreign savings earned while working abroad

[aam123]

Hi,

I worked abroad for a number of years (outside the EU). When I came home, I left a reasonable level of savings on deposit in a foreign bank.

I sometimes use my old credit card to pay for things, or even transfer small amounts home from time to time. Could these technically trigger a capital gain or loss?

I didn't buy the foreign currency as an investment. They were saved over time in the normal course of work while I lived there. In the last year or two, I have earned a non-negligible amount of deposit interest. I have paid DIRT on this in my annual returns when due.

At some point in the future I might bring the savings home to put them towards something substantial. Is there are theoretical gain/loss? Would I be calculating the base cost using the FX at the time they were earned, or the time I moved home? I presume the interest amounts since I came home would be the time they were paid.

Lets suppose I saved 100k AUD between 2015 and 2020. I then moved back in April 2020 when the exchange rate was 1 AUD = 0.58 Euro. So my savings were the equivalent of 58k Euro at that point in time. Today, the 100k would get me 61k Euro. Would I be liable for CGT on the 3k Euro? Or would I need to look at the rate on every day I was paid and do some kind of weighting?


Or is there no issue because I earned them as AUD rather than buying AUD with Euro as an investment?

 

[AAAContributor]

Lets suppose I saved 100k AUD between 2015 and 2020. I then moved back in April 2020 when the exchange rate was 1 AUD = 0.58 Euro. So my savings were the equivalent of 58k Euro at that point in time. Today, the 100k would get me 61k Euro. Would I be liable for CGT on the 3k Euro? Or would I need to look at the rate on every day I was paid and do some kind of weighting?

Or is there no issue because I earned them as AUD rather than buying AUD with Euro as an investment?

I don't believe FX rates in 2020 are relevant, unless you re-based the AUD 100,000 deposit balance before your return to Ireland (sold AUD, bought EUR & bought AUD, sold EUR).

You acquired AUD balances between 2015 & 2020. If you dispose of the AUD there will be a disposal for capital gains tax purposes. The acquisition FX rate for CGT purposes is the spot rate at the date of acquisition.

Practically speaking, you were building up an AUD balance over the years and it'd be an onerous task to apply specific FX rates. A reasonable approach would be to use an average FX rate per the Irish Central Bank:

Euro Exchange Rates | Central Bank of Ireland

Official euro exchange rates from 1999 to the present.

www.centralbank.ie

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-06-12.pdf

As regards your example above, it looks like AUD has weakened against the EUR (from 2015 to date) and therefore a capital loss may be available if the fact pattern was to follow along the lines of these workings:

Year	Euro to Australian Dollar (Central Bank avge rate)	Australian Dollar to Euro	AUD	EUR
2015	1.4777	0.6767	20,000	13,535
2016	1.4883	0.6719	20,000	13,438
2017	1.4732	0.6788	20,000	13,576
2018	1.5797	0.6330	20,000	12,661
2019	1.6109	0.6208	20,000	12,415
2020	1.6549	0.6043
2023	1.6361	0.6112
		Acquisition	100,000	-65,625
		Disposal	-100,000	61,120
				-4,505

I sometimes use my old credit card to pay for things, or even transfer small amounts home from time to time. Could these technically trigger a capital gain or loss?

They could - you are disposing of an asset (foreign currency), but the annual exemption may result in no CGT payable.

If you were using the AUD to maintain a residence abroad or meet personal expenditure of you or your family outside Ireland I think Section 541(6) would mean that disposals of AUD would not give rise to a chargeable gain/loss. It does not look like that is happening here.

 

[aam123]

The reason I asked 2020 would be as the return date in my hypothetical example.

If you purchased EUR with all the AUD at that time (just before coming home), there would be no FX gain or loss for the period 2015-2020.

If you had been purchasing EUR on-going between 2015 and 2020 then there would also be no FX gain or loss.

In theory, if the gain was large enough, one could re-emigrate back there for long enough. Then while there, "invest" in EUR. No tax triggered there or here. Then move back. Then transfer their EUR home. Which seems a bit silly.

 

[cloughy]

It maybe exempt, if its income earned and taxed abroad whilst you were non resident and not liable to tax in Ireland then I would not have thought bringing it back would attract taxes, and if it did then I would assume it would be income rather than capital gains.

When did you earn it, when did you return to Ireland that's what you have to look at, as many people have worked abroad saved money on their earnings and then came to Ireland and brought in without being liable to irish tax.

If its a large amount, then maybe seek tax advice, but look at revenue website to see how monies earned abroad whilst not liable to irish tax is treated.

I assume you would need to disclose on your tax return as its a foreign asset, but just spending this maynot have any tax liability, and if not liable to income tax then I'd say no gain/loss allowed for CGT.