Strengthening the tax on foreign currency loans

Foreign currency loans attract interest rates that are low and the possibility of earning currency gains if the exchange rate improves favorably. For this reason, more and more private individuals are taking out foreign currency loans.
If exchange rate gains are realized within one year (the speculation period) – e.g. through conversion into another currency – the question arises as to their tax treatment. According to the current view of the tax administration (Rz 6624a of the EStR), the conversion of a foreign currency debt into private assets only resulted in taxable speculation gains if within one year the conversion took place in euros or into a currency linked to the euro at a fixed exchange rate. In the absence of an inflow of exchange rate gains, a conversion into a currency linked to the euro at a floating exchange rate did not trigger any tax liability.
After now changed view of the financial administration (to ensure equal treatment with business income) however, a definitive realization of the exchange rate gain should also be determined at the time of conversion in the case of currencies with fluctuating exchange rates, so that a taxable speculative gain is present. Therefore, if the annual free limit of a total of € 440 is exceeded, conversion gains realized within one year may be subject to a tax burden of up to 50%%. It is not possible to offset speculative income with other income; there is only a possibility of offsetting it with other losses from speculative transactions. Therefore, it should in any case be ensured that a conversion of the foreign currency debt takes place – if possible – outside the one-year speculative period.