Following on from the thread on "Funding a broker account with usd/foreign currency", and assuming from the conclusion there that you have to maintain an account in the currency of choice, how and when do you pay tax on currency gains?
Calculating the gains on the shares themselves is presumably straightforward enough, using first-in-first-out rules. But then, what about the euro-equivalent of the money with which you bought and sold the shares? Presumably if the proceeds of a sale just lie in your foreign currency account, you have made no FX gain or loss yet. But then, accounting for your money becomes pretty complicated. There is a whole different set of dates on which you send money to, or receive money from your foreign currency account. Do you simply ignore what you did with the money (e.g. buy shares) and just look at lodgements and withdrawals? Then you have to deduct FX commission/transaction costs and pay tax on FX gains?
But what about gains that you made on shares in a foreign currency? You never FX'd that to your account in the first place. Do you reckon their value using the prevailing EUR exchange rate on the date of sale, and then pay tax on that? If so, you now have money resting in your FX account on which tax is already paid. When you eventually actually convert that back to euro there is a different rate. Do you have to pay more tax then? Can you claim a loss if it has gone against you? Do you have to treat it all differently to money that you exchanged but didn't buy shares with? It all sounds hopelessly confusing!
Since your purpose is not to speculate on currency can you simply ignore the FX aspect of share trading in your tax returns? On the other hand, if the EUR suddenly regained the 15% or so that it has lost against USD recently, you'd feel pretty miffed if you couldn't allow for that as a loss in your calculation of the EUR gains on your USD shares.
Calculating the gains on the shares themselves is presumably straightforward enough, using first-in-first-out rules. But then, what about the euro-equivalent of the money with which you bought and sold the shares? Presumably if the proceeds of a sale just lie in your foreign currency account, you have made no FX gain or loss yet. But then, accounting for your money becomes pretty complicated. There is a whole different set of dates on which you send money to, or receive money from your foreign currency account. Do you simply ignore what you did with the money (e.g. buy shares) and just look at lodgements and withdrawals? Then you have to deduct FX commission/transaction costs and pay tax on FX gains?
But what about gains that you made on shares in a foreign currency? You never FX'd that to your account in the first place. Do you reckon their value using the prevailing EUR exchange rate on the date of sale, and then pay tax on that? If so, you now have money resting in your FX account on which tax is already paid. When you eventually actually convert that back to euro there is a different rate. Do you have to pay more tax then? Can you claim a loss if it has gone against you? Do you have to treat it all differently to money that you exchanged but didn't buy shares with? It all sounds hopelessly confusing!
Since your purpose is not to speculate on currency can you simply ignore the FX aspect of share trading in your tax returns? On the other hand, if the EUR suddenly regained the 15% or so that it has lost against USD recently, you'd feel pretty miffed if you couldn't allow for that as a loss in your calculation of the EUR gains on your USD shares.