Exchange rate for Tax purposes

[AnOther]

Understandably all figures on the tax forms are to be entered in Euros but at what exchange rate.

For those who have Sterling incomes (your's truly for instance) this is an important number yet I haven't seen a rate stated anywhere. For those currently filling out their forms (again your's truly) it can't be "as on the day" surely ?

[8-)]

[Patf]

I rang our tax office on Friday and the man gave me 1.4237   This is obviously a good bit higher than today's rate. Mysterious - perhaps an average for last year.

[Clair]

http://www.completefrance.com/cs/forums/1218672/ShowPost.aspx

[Bob T]

Easy for me, I just enter the amounts paid into my French bank account and include the UK P60.

[Ron Avery]

What use is a P60 to support a tax return Bob?  Apart from being totally unnecessary, they will contact you if they want proof, it only gives the totals for the UK tax year March - April. 

The mean average rate for 2007 calculated from the bank exchange rates, which is probably not what you actually got, was 1.45€ so if 1.42€ is being given as the official  figure that is lower.  At the start of the year it was 1.50€ going down to 1.38€.

Ernie, its the rate prevailing at the time you received your income whether that was in £, $ or yen.  How you calculate what you declare is for your conscience.

[Nell]

1.3636 is what the French News newspaper said, so that is what I have used

[suein56]

[quote user="Nell"]1.3636 is what the French News newspaper said, so that is what I have used[/quote]

But that figure was for calculating the value of your goods and chattels for the Impot sur la Solidarité de la Fortune ie ISF or wealth tax which is worked on 1st January with the exchange rate value for that day.

Sue

[Ron Avery]

"1.3636 is what the French News newspaper said, so that is what I have used"

 IF that is what it says, it just goes to show what a load of c**p that paper is then.  You know its wrong unless you got all your income in December 2007.

If you got income throughout the year,  using an average rate below 1.42 is taking the piss and you know it[:@]

[AnOther]

[quote user="Ron Avery"]Ernie, its the rate prevailing at the time you received your income whether that was in £, $ or yen.  How you calculate what you declare is for your conscience.[/quote]On that basis then I should be looking at each of my payslips from August (when we moved) to December and calculating the rate on the relevant pay day.

I pay PAYE tax in UK anyway so that side of things is not really an issue, it's really just for the interest from other deposits etc. and in all honesty, for the modest amounts involved at this point in time and for the 5 month's covered, whether it's calculated at 1.42 or 1.36 is pretty inconsequential.

Don't know how I missed the other threads on the topic BTW so apologies for starting this new one [:$]

[Lou]

I agree Ron.

I've used the actual rate we got from the currency exchange people for my husbands pension - and an average of these amounts for the savings interest which we haven't transferred to France.  I feel this is a) honest and b) (as someone else said on one of the other threads I think) defensible, should I be asked by the Impots, as I have documents proving the rates throughout the year. They surely can't argue with that?

The upside of this years low exchange rates will be, I guess, lower declarations and lower tax/social charges in 2009 - a small consolation perhaps?

Lou

[Mikew]

Phoned the local Impots, (Ruffec 16), to enquire what exchange rate to use for my tax return - use 1.3636 was the reply....

[Jay]

[quote user="Ron Avery"]

"1.3636 is what the French News newspaper said, so that is what I have used"

 IF that is what it says, it just goes to show what a load of c**p that paper is then.  You know its wrong unless you got all your income in December 2007.

If you got income throughout the year,  using an average rate below 1.42 is taking the piss and you know it[:@]

[/quote]

Ask in your local tax office and they will confirm the rate should be 1.363

[Ron Avery]

[quote user="Jay"][quote user="Ron Avery"]

"1.3636 is what the French News newspaper said, so that is what I have used"

 IF that is what it says, it just goes to show what a load of c**p that paper is then.  You know its wrong unless you got all your income in December 2007.

If you got income throughout the year,  using an average rate below 1.42 is taking the piss and you know it[:@]

[/quote]

Ask in your local tax office and they will confirm the rate should be 1.363
[/quote]

Yes just like PatF did above in the Gers and got told it was 1.4237.  Where is youir local tax office Ruffec as well??

Like many others I have calculated the average rate and we all know that using 1.363€ is just not correct, but if you really believe that is the official rate and that the tax office understood your question, go ahead and underpay your tax, sociale charges and CMU..

[BobDee]

Sounds blindingly obvious to me that Ron is correct. How though, does the tax office know from the 2042/2047 submission what rate you are using? Or is the rate only going to emerge if you get audited?

This being my first year I have annoted the 2047 with the rate I have used (1,4245), just to pre-empt the question. 

BobD

[Jay]

[quote user="Ron Avery"]

Like many others I have calculated the average rate and we all know that using 1.363€ is just not correct, but if you really believe that is the official rate and that the tax office understood your question, go ahead and underpay your tax, sociale charges and CMU..

[/quote]

It's too late for me, I already used 1.4 on my form, but it seems to me if the tax office quote a figure then that is official and if you benefit from it all well and good, would you argue with a figure given by the UK tax office which worked to your benefit? We have friends in Deux Sevres (79) who took their paperwork into the office and were told to use 1.363 and yes, my local office, Ruffec (16) also uses this same exchange rate.

Like Bob, I also enclose my P60 with the return as I was asked to do so by the lady in the office, I assumed it was something to do with my being taxed in the UK because, as you point out Ron, there is no requirement to do this.

You seem to be getting a bit hot under the collar on this one Ron!

[allanb]

I'm with Ron on this.  The law requires you to use the market rate on the day when you received the income.  It is obviously possible to calculate an average which represents approximately the same thing (I come up with 1.453, and I'm sticking to it because I can document it if I have to.  It's not the only possibility.)

Using a year-end rate for 2007 (when the £ fell by about 12% against the euro) is neither legal nor sensible, but if your tax inspector lets you do it, that's fine.  I strongly advise you not to do it unless -

(1) your local inspector (not someone else's) has told you in writing that it's OK; and

(2) you are sure that he knows that it's for income, not for asset values at the end of the year; and

(3) you are willing to follow the same method consistently in future years, even if the £ goes back up against the euro.

I don't know how likely it is that you will be audited.  But remember that you will have declared pension income which appears to be lower in 2007 than it was in 2006 - this in itself may provoke a question, because most pension adjustments are up, not down.

And if it does happen, the auditor will not be the same person as the nice lady behind the desk who told you that the year-end rate would be just fine.

[Patf]

Having said all that, the first year I filled in a return here I looked up the rate on the day I wrote and used that. Nobody questioned me about it. Nor did they ask me to show how I had pro-rated the british income etc before and after the end of the previous April.

[Jay]

Allanb said:

"The law requires you to use the

market rate on the day when you received the income."

Logically you would have to total each income on the basis of when it was

received and put down the exact figure, why then does the tax department use an

annual figure and why are you breaking the law by using an average figure?

"But remember that you will have declared

pension income which appears to be lower in 2007 than it was in 2006 - this in

itself may provoke a question, because most pension adjustments are up, not

down."

There is no logic in that statement. If, for

argument sake, you have a pension of £1000 this year then, using the exchange

rate you quote, you would enter 1453 Euro on your tax return. Assuming an

inflation rise of 3% next year your pension would be £1030. Let's be optimistic

and say the average exchange rate for 2008 to be 1.3, then your entry on next

years tax form would be 1339 Euro. Are you saying the tax office is not aware

of the fluctuating exchange rate/weak pound and would question every return

where income has dropped?

When we first moved here the exchange rate was 1.68, it is now in the region of

1.3 that is a drop of 380 Euro per £1000.

"I come up with 1.453, and I'm sticking to it

because I can document it if I have to.  It's not the only possibility"

surely there is only one possible figure; if

you are right then you are right! What other possibilities are there?

".....you are willing to follow the same method

consistently in future years, even if the £ goes back up against the euro."

Of course I am - ask the tax office then use the figure they provide, no

problem.

[Russethouse]

I just hope all you people who have 'asked the tax office' at least have the name of the person you spoke to and have recorded the date and time and ideally a reference number?

It's no great surprise that you will need this info so you just record the rate each time and average it, that is not only fair but supportable, and my experience of dealing with tax offices, that is what they look for.

I believe www.xe.com has a facility where you can go back to past exchange rates if you need to.

[allanb]

[quote user="Jay"]...why then does the tax department use an annual figure?[/quote]In order to save people's time, some tax departments (maybe all, I don't know) say they will accept a rate of X in lieu of a whole lot of calculations.  They do not say you have to use X.  You can do the exact computation if you want: it happens to suit me, becase I do the calculation anyway for other reasons.[quote]Are you saying the tax office is not aware of the fluctuating exchange rate/weak pound and would question every return where income has dropped?[/quote]Please don't misquote me, I didn't say that.  I'm talking about the likelihood of being selected for audit.  Anything that looks even a little bit strange may cause them to select particular returns; I don't know what principles they use, and for obvious reasons they don't publish them.

I should add that as far as I know the probability of an audit is really very low, but it's said to be quite unpleasant if it does happen.

[quote]...surely there is only one possible figure; if you are right then you are right! What other possibilities are there?  [/quote]

In foreign exchange there are always different possibilities; there is no such thing as the exchange rate on a particular day.  For that reason even the legal definition is not precise.  What we're talking about here is the question of what is an acceptable approximation ("acceptable" = acceptable to your tax inspector.)  Tax inspectors know the law, but they have some discretion.

[Ron Avery]

[quote user="Jay"][quote user="Ron Avery"]

Like many others I have calculated the average rate and we all know that using 1.363€ is just not correct, but if you really believe that is the official rate and that the tax office understood your question, go ahead and underpay your tax, sociale charges and CMU..

[/quote]

Like Bob, I also enclose my P60 with the return as I was asked to do so by the lady in the office, I assumed it was something to do with my being taxed in the UK because, as you point out Ron, there is no requirement to do this.

You seem to be getting a bit hot under the collar on this one Ron!

[/quote]

No I'm not jay, I just object to the opinion of one tax official who is clearly in error being bandied about as "Official" just as the French News figure was also seized on as "official" because it suited people.   If the boot was on the other foot how many would have meekly accepted this rate as gospel?

 The truth is the rate should be the prevailing rate when the interest was received and I endorse all that Allan has stated, but there are other possibilities, if you receive annual interest the year end figure is correct, if you get interest monthly you should use the prevailing rate or a mean average or a weighted average, a mean average will mean a slightly higher rate than a weighted average as most of the fall in the value of the £ was in the second half of the year. 

The chances of getting a check are small unless you are claiming large refunds for heating, solar etc but at least using a calculated figure based on monthly rates can be justified far better than the woman at the Ruffec tax office told me but I did not mention it was for income received throughout the year.[blink]

[AnOther]

You can get have a pretty accurate stab from the currency chart on HiFX. For the pedants you can get a precise rate for any day if you so wished. 

As depressing as it looks 1.42 would seem to be a fair average for the year as a whole.

[IMG]http://i127.photobucket.com/albums/p123/biskitboyo/euro-pound.jpg[/IMG]

 

[Jay]

[quote user="Russethouse"]

It's no great surprise that you will need this info so you just record the rate each time and average it, that is not only fair but supportable, and my experience of dealing with tax offices, that is what they look for.

[/quote]

Fair it may be but are you seriously suggesting that every time you have money coming into France you record the amount and exchange rate? Many people have income on an irregular basis in the UK and use bank transfer. The rate changes daily. What about people that trade on eBay for example, and lots do, and put down that income for tax (and lots don't). Say you buy and sell one piece of equipment a day, add to that other income from the UK, rents, pensions, savings etc., you are talking masses of paperwork. It may be OK if you have a simple , single monthly income but otherwise it would be a real chore. You say you have lots of experience with tax offices, are you talking about France or the UK? If it is the UK then you would not have any problems with the exchange rate in any case.

[Ron Avery]

Jay

You are now talking about income that is not even taxable in France.

You don't normally transfer large amounts of £s to France, it comes as euros and if it is from capital its not taxable in France anyway. What is at issue here is the euro value of £s received as income from rents and interest, so its really quite simple, its the value on the date it was credited to your account, that is what you declare. 

Income from eBay is no more taxable in France than money made selling a car or a lawnmower or at a boot fair.  Unless its your business and you buy and sell to make a profit.  I have sold stuff at a loss on Ebay so can I count that against tax?  Of course not.

[milkeybar kid]

We have just returned from Trésorerie at Agen 47 on another matter but while there asked if they new the official rate to use for the Tax forms to show bank interest -we showed paperwork that made it clear it was Uk bank interest. They also phoned The Impôt for double confirmation as they understood our concern , I have the figure in writing and signed for,there official figure they said to use was 1.36. [:D]