Starting with 2024: foreign currency accounts (USD, GBP, ...) make your German tax return a nightmare

[PandaMunich 16,915]

If you don't feel like reading the below long explanation, here's what you need to do:

By the end of 2023, get rid of all your non-€ accounts outside Germany that pay interest - except for current accounts, no matter whether they pay interest or not, those you get to keep.
But take care to let the money in those non-€ current accounts outside Germany "cool off" for more than 1 year, i.e. only "use" a batch of money after more than 1 year has passed since that batch of money entered the current account.

If you have a non-€ fixed-term deposit outside Germany which will only end at some point after 01.01.2024, don't worry, it still falls under the much more advantageous "old" rule, only fixed-term deposits with a starting date on or after 01.01.2024 will fall under the "new" rule.
However, as soon as this "old" (= from 2023 or earlier) deposit ends, do not prolong it, but either move the money into a current account and don't touch it for more than 1 year, or should you want to enter into another non-€ fixed-term deposit (Festgeld) or you want to keep the money in a direct access savings account (Tagesgeld), do so in a German bank/broker.

See here for an overview of German banks/brokers that offer non-€ accounts: https://www.tagesgeldvergleich.net/tagesgeldvergleich/fremdwaehrungskonto.html
Take care, some of these linked providers are not from Germany - discard them.
Only a German bank/broker will make your German tax return "easy" by calculating your currency gain for you and by already taxing it at the source. If you forgot to tell that German bank/broker through a Freistellungsauftrag to exempt the first 1,000€ of your capital income from tax, they will give you a Steuerbescheinigung to use in your German tax return and you will get back the overpaid tax.

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Overview
The German Ministry of Finance (= BMF = Bundesfinanzministerium) has communicated a change for what will be considered capital income.
They changed their interpretation of how the law is to be applied, see side number 131 (this is the new interpretation of the law) and side number 325 (this is where they graciously tell us that they will not complain if we only apply this new interpretation starting with 01.01.2024) in this change document: https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Abgeltungsteuer/2022-05-19-einzelfragen-zur-abgeltungsteuer.pdf

At some point within the next few months, these changes will be integrated into the BMF letter on capital income "Einzelfragen zur Abgeltungsteuer" (the link doesn't work yet): https://esth.bundesfinanzministerium.de/esth/2022/C-Anhaenge/Anhang-19/II/inhalt.html
At the moment, only the "old" version of the BMF letter is online, in which side number 131 was a lot shorter (and actually followed the law): https://esth.bundesfinanzministerium.de/esth/2021/C-Anhaenge/Anhang-19/II/inhalt.html

This "new" rule is effective immediately, but since the German banks/brokers need time to program the change, the BMF has allowed them to only apply it starting with 01.01.2024.
So I will assume the same latitude also applies to everybody else.

--> This gives you time to rearrange your accounts, so that by 2024, you do not run afoul of this new rule.

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How it was before (and still is, for crypto):
Under the "old" rule, if you bought a non-€ currency and then sold it again within a year and that non-€ currency had appreciated in value in the meantime, you had to tax the gain from currency speculation as "other income" (= sonstige Einkünfte) in "Anlage SO", with your own personal variable income tax rate of up to 42%, but only if your total currency gain that year was over 600€.
If you made a loss, that loss was applied against your other currency speculation gains that year, and if there were none, the loss was carried forward indefinitely, until it hit a currency speculation gain against which it could be used, i.e. which it could reduce.

If, on the other hand, you kept that non-€ currency for more than 1 year, then whatever gain you made was not taxable, i.e. it did not appear at all in your tax return.
The assumed selling order for non-€ currency is FIFO (first in, first out), i.e. the "oldest" batch of currency is assumed to have been sold first.
--> all people had to do to avoid having to calculate a currency speculation profit (or loss), was to let their money in their non-€ bank accounts "cool off" for more than 1 year, i.e. not touch a batch before more than 1 year has passed.

This is still the way crypto currency is dealt with, see here: https://expertise.tax/en/tax-on-bitcoin-profit/

What happened?
Some boffins at the BMF (German Ministry of Finance) noticed that they could get some extra tax, by a mind-boggling interpretation of the law.
Wait for it.
They say that when you keep non-€ in an interest-bearing account which is not a current account, e.g. in a non-€ direct access savings accounts (Tagesgeld) or in a non-€ fixed-term deposit (Festgeld), you don't really own that foreign currency (which would make this subject to the rules laid down in § 23 EStG), but rather, you only own a "claim against that bank/broker" and every transaction within that account is you either "selling" or "buying" a claim, which means that you will have a lot more profit to tax than before, since every "sale" (no matter how fictive it is) triggers a profit calculation.
Profit, which is part of the income category "capital income" and therefore has to be declared in "Anlage KAP" and taxed with 26.375% tax (25% Abgeltungsteuer + 5.5%*25% Solidaritätszuschlag).

Never mind that currency speculation is regulated in § 23 EStG, which very clearly states the rules governing buying and selling non-currency, as explained in the above section "How it was before (and still is, for crypto)".
They now want us to ignore this law § 23 EStG.

The BMF sees pretend "purchases" and "sales" everywhere, every time something "changes", see here for the machine-translation of the ominous "side number 131" (Randziffer 131): https://esth.bundesfinanzministerium.de/esth/2022/C-Anhaenge/Anhang-19/II/inhalt.html

• 131 

  The acquisition and sale of foreign currency amounts may be a private sale transaction within the meaning of section 23, paragraph 1, sentence 1, number 2 EStG (BFH ruling of 2 May 2000 - IX R 73/98, BStBl II p. 614), provided that the income is not attributable to income from capital assets (section 23, paragraph 2 EStG in conjunction with section 20, paragraph 2, sentence 1, number 7, paragraph 2, sentence 2 and paragraph 4, sentence 1 EStG).
  
  Currency gains/losses from the sale or repayment of a securitised or non-securitised interest-bearing capital claim or an interest-bearing foreign currency credit balance (interest-bearing foreign currency account) are to be taken into account in accordance with section 20, paragraph 2, sentence 1, number 7 and paragraph 4, sentence 1 EStG. In this context, each deposit or credit of interest to an interest-bearing overnight deposit (Tagesgeld), fixed term deposit (Festgeld) or other foreign currency account constitutes an acquisition transaction.
  
  In the case of subsequent repayment, there is a transaction equivalent to a sale within the meaning of section 20(2) sentence 2 EStG, cf. also marginal no. 59. In this context, it is irrelevant whether any foreign currency capital claim is simultaneously converted into euros or a third currency. The same applies if the foreign currency capital claim is reinvested at interest after maturity (in case of a Festgeld) or transferred to another interest-bearing account at the same or another credit institution. For tax purposes, these transactions represent a sale of the original capital claim and at the same time an acquisition of a new capital claim.
  
  The prolongation of capital claims that are due daily (e.g. Tagesgeld) and the change in the interest rate do not in themselves constitute an acquisition or disposal unless the credit balance bears interest for the first time or a previously interest-bearing credit balance is invested without interest for the first time.
  
  In the case of the acquisition and disposal of several foreign currency amounts of the same kind, it is to be assumed that the amounts acquired first are disposed of first (= FIFO).
  
  In the case of foreign currency credit balances on payment transaction accounts (e.g. current accounts, basic accounts, Girocard), credit cards and digital means of payment, it can be assumed that these are used exclusively as a means of payment and that there is no intention to generate income within the scope of income from capital assets. A recognition of currency gains/losses according to § 20 paragraph 2 sentence 1 number 7 and paragraph 4 sentence 1 EStG for means of payment is therefore ruled out. Only the interest earned on these foreign currency credit balances is subject to taxation under § 20 paragraph 1 number 7 EStG.
  
  Currency gains/losses from the sale or repayment of a non-securitised and non-interest-bearing capital claim or a non-interest-bearing foreign currency credit balance are to be taken into account in accordance with section 23, paragraph 1, sentence 1, number 2 EStG when the foreign currency credit balance is sold. If the foreign currency amount is exchanged for euros or a third currency within the period of § 23 paragraph 1 sentence 1 number 2 EStG, currency gains/losses that have already been recognised in income from capital assets are not to be additionally recognised in income from private sales transactions, § 23 paragraph 2 EStG.

  
  

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Summary:
According to the German Ministry of Finance, a withdrawal of money in a foreign currency account or just a prolongation of a fixed-term deposit is a "sale of a capital claim" under § 20 (2) Nr. 7 EStG: https://dejure.org/gesetze/EStG/20.html
That was their excuse for moving the currency gains from "other income" to "capital income".
Sorry, but if that were really the case, then all currency accounts would be affected, not just the interest-bearing accounts that aren't current accounts...

By the way, the Association of Foreign Banks in Germany (who, since they have a German branch, have to retain German source tax on capital income and have to issue Steuerbescheinigungen and therefore have to implement this change into their software), also says that this isn't legal: https://www.vab.de/wp-content/uploads/2022/01/stell_BMF_270821.pdf
as follows:

3) regarding number 131 (currency gains/losses):
In our opinion, the tax assessment of "currency gains/losses from the sale of an interest-bearing foreign currency credit balance (interest-bearing foreign currency account)" described by you under "Currency gains/losses from the sale of an interest-bearing foreign currency credit balance (interest-bearing foreign currency account)" contradicts the statutory provision of Section 23 (1) No. 2 EStG and the common settlement practice at the level of the credit institutions.

In our opinion, irrespective of the interest paid on the foreign currency account, it is still a factual situation that is to be subsumed under § 23 paragraph 1 number 2 EStG.
The interest on the foreign currency credit does not change the fact that the asset continues to be a foreign currency credit.
The decision as to whether interest is to be paid on the foreign currency account is a business policy decision of the banks, which is largely dependent on their refinancing possibilities.
In our opinion, a deviating tax treatment of the asset resulting from this is not appropriate.

Against the background of the wording of § 23 (1) no. 2 sentence 4 EStG, an extension of the period within which a private sale transaction is assumed seems appropriate. However, parts of the tax authorities have already contradicted this legal opinion (see, for example, BayLfSt S 2256.1.1-6/6 St 32 of 10 March 2016).

In addition to the tax law concerns already described, the change in practice, which has been tried and tested over many years, would lead to a considerable implementation effort at the level of the depositary institutions.
A short-term implementation of this surprising change from the perspective of the tax authorities is not possible for the members.
This is because, similar to securities, a FiFo database would have to be implemented here. In addition, it would also have to be clarified how the data could be passed on in the case of transfers of foreign currency assets between banks.

We have summarised the reasons for this for you again as follows:

• In our opinion, the fact that interest is paid on certain accounts must not lead to a classification in a different category of income within the meaning of the EStG. The question of whether interest is paid on certain accounts is exclusively a matter of business policy decisions by the commercial banks.
  
  
• The tax classification of an asset depending on whether interest is paid on it cannot be inferred from the current version of sections 20 and 23 EStG. In this respect, there is no legal basis for marginal no. 131.
  
  
• Against this background, it also appears inconclusive or contradictory that the Federal Ministry of Finance, in the context of the draft of 3 June 2021 on "Individual Questions on the Income Tax Treatment of Virtual Currencies and Tokens", still assumed an extension of the disposal period to ten years (see marginal no. 47 of the draft letter of 3 June 2021) if units of a virtual currency or token are used as a source of income. No different principles should apply to the taxation of foreign currency accounts than to the taxation of virtual currencies or tokens: https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Einkommensteuer/2022-05-09-einzelfragen-zur-ertragsteuerrechtlichen-behandlung-von-virtuellen-waehrungen-und-von-sonstigen-token.html
  
  
• The administrative burden on custodians contrasts significantly with the expected tax revenue. In the current market environment, only low-interest currency accounts are offered by institutions. It can be assumed that the products offered will be reviewed against the background of economic cost-benefit considerations.

[emkay 10,345]

Thank you PandaMunich for this advice. Forewarned is forearmed. I was just deliberating as to whether I should transfer all UK interest earning bank/building society account funds to DE. I also have a couple of small private pension funds that have stopped increasing in value over the last year. I can cash in one anytime and another has 3 more years to go. Do these pose a similar problem?

Re the UK private pension funds….these are eligible for UK 25% tax free payout. The remainder at ca. 20% UK tax. How is this now treated post Brexit/DE Progressionsvorbehalt (based on my husband’s income)? I think I saw this mentioned before though can’t find the relevant information. Many thanks in advance for any advice on this.

[scook17 292]

So if you have a savings account, rather than a current account, in a non Euro currency, now every transaction will need to be converted to Euros and an assessment of if there is a capital gain on the currency calculated on a FIFO basis.

So practical example. Correct me if I get this wrong please.

A. Savings account has £1000 deposited 01.01.2024.
B. 31.12.2024 Savings account is paid £50 (5%) interest.
C. 01.01.2025 another £1000 deposited.
D. 01.06.2025 £500 is withdrawn from the account to a UK current account.

So,
A. Value in Euros needs to be recorded.
B. Value of interest in Euros needs to be recorded.
C. Value in Euros needs to be recorded.
D. The £500 withdrawal is against the money deposited at point A. The currency may have moved ten cents or so in a year, either up or down, more so if there was a longer period, say saving for retirement. The £500 has to be valued at the exchange rate of the 01.06.2025 and a gain/loss declared compared with the valuation of the £500 in Euros when deposited back in 31.12.2024. Gain might be £500 x 0.10 cents gain = 50 Euros profit. Equally it could be a loss if the currency moved the other way. Presumably there is some allowance so a small amount 50 Euros does not in fact change any tax amount payable, but becomes a 500 Euro plus bill from the tax accountant for the paperwork.

Basically all transactions need to be converted to euros and double records kept in each currency. The profit/loss must be declared each year based on the actual transaction dates and the spot rate of that day.

Most problematic accounts to be hit by such regulations are savings accounts, be those US or UK, so ISAs, SIPPS, IRAs etc. which are very common amongst UK and US ex-pats. Presumably also investment accounts where there are many trades/transactions, or where dividends are received etc.

[PandaMunich 16,915]

>emkay wrote: I also have a couple of small private pension funds that have stopped increasing in value over the last year. I can cash in one anytime and another has 3 more years to go. Do these pose a similar problem?
No, since those always had to be calculated using the currency gain.

Example:
You paid 10,000 GBP on 15.06.2000 into that UK private pension.
The exchange rate on 15.06.2000 was 1€ = 0.63160 GBP: https://www.ecb.europa.eu/stats/exchange/eurofxref/shared/pdf/2000/06/20000615.pdf
--> your contribution was worth 15,832.81€ (= 10,000 GBP / 0.63160 GBP/€)

On 15.06.2026, the exchange rate will be (I'm turning on my crystal ball): 1€ = 0.5 GBP.
Your private pension provider invested in real estate.
On 15.06.2026, when you haven't yet reached age 60, they pay out 35,500 GBP to you.
--> the payout is 35,500 GBP, which is worth 71,000€ (= 35,500 GBP / 0.5 GBP/€) 

This means that you have to declare in line 19 "Ausländische Kapitalerträge" of Anlage KAP 2026 of your German tax return the growth of 55,167.19€ (= 71,000€ - 15,832.81€) with 26.375% German tax (= 25% Abgeltungsteuer + 5.5%*25% Solidaritätszuschlag).
--> You will pay in German tax: 14,550.35€

So the currency gain is "baked into" this.
If the currency gain had not been taxable, you would have only had to tax 51,000€ (= [35,500 GBP - 10,000 GBP)] / 0.5 GBP/€).

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If you were at least age 60 at the time of payout, only half of the above growth would be taxable, because of § 20 (1) Nr. 6 Satz 2 EStG - but you still declare these 55,167.19€, i.e. you do not declare half, the Finanzamt halves the amount internally.

But you then do so in a different place in your tax return, in Anlage KAP line 30 "Kapitalerträge aus Lebensversicherungen i. S. d. § 20 Abs. 1 Nr. 6 Satz 2 EStG": https://www.steuern.de/fileadmin/user_upload/Steuerformulare_2022/Anlage_KAP_2022_steuern.de.pdf

--> 27,583.60€ (= 50% * 55,167.19€) then gets taxed with your own personal variable income tax rate of up to 42%.

>Re the UK private pension funds….these are eligible for UK 25% tax free payout. The remainder at ca. 20% UK tax.
Take care, the only private pension payouts on which the UK has the taxation rights are those for private pension into which, for more than 15 years contributions that were tax-relieved in the UK were paid, see article 17 (3) of the double taxation agreement (DTA) between Germany and the UK: https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Internationales_Steuerrecht/Staatenbezogene_Informationen/Laender_A_Z/Grossbritannien/2010-11-23-Grossbritannien-Abkommen-DBA-Gesetz.pdf?__blob=publicationFile&amp

--> if your private pension does not fulfil the "more than 15 years of tax-relieved contributions in the UK" requirement, Germany has the taxation rights on it, because of article 17 (1) of the DTA:

• (1) Subject to the provisions of paragraph 2 of Article 18, pensions, other similar remuneration or annuities arising in a Contracting State and paid to a resident of the other Contracting State, shall be taxable only in that other State (= in Germany)
  

This means that the UK is not allowed to tax the private pension payouts at all and if your private pension provider retains UK tax at the source, you have to get it back from HRMC.
Getting back tax from HMRC, which it wasn't entitled to, since the DTA assigns the taxation rights to Germany and not to the UK, is possible, but it takes some time. 
A client found a good contact at HMRC two years ago for this, that phone number may still work:

• "I managed to get a hang of a very helpful lady at HMRC who informed me that my DTA Claim was almost completely processed.
  There had been some ping-pong between the National Tax and International Tax advisors (internally to HMRC) about my case, which explained why it spanned from August to today.
  As she informed me, all is OK-ed since December 17th so now it should just be a matter of weeks to get an official calculation letter, and repayment, through the post.
  It might be worth for your other customer to give them a ring at +44 1355359022, he'll need his NI number and date of birth to go through it."

[PandaMunich 16,915]

>scook 17 wrote: Basically all transactions need to be converted to euros and double records kept in each currency. The profit/loss must be declared each year based on the actual transaction dates and the spot rate of that day.

Yes, correct.

[RenegadeFurther 2,394]

I have an ISA and get around 400 a year on it. The interest on my ISA is much higher than any German bank account.

I have to get rid of my ISA even though it is less than the 1000 euros tax free?

[emkay 10,345]

Are you eligible for a UK ISA as a non resident?

[RenegadeFurther 2,394]

I am not allowed to put money in it.

But I can keep it open as I opened it before I moved to Germany.

[PandaMunich 16,915]

>RenegadeFurther wrote: I have an ISA and get around 400 a year on it. The interest on my ISA is much higher than any German bank account.
You have been declaring this ISA interest every year in your German tax return, I hope.
Because it isn't tax-free in Germany: https://expertise.tax/en/faq-german-tax-system/#resident

• You have to declare your worldwide financial holdings in your German tax return, this includes investment funds you simply held, i.e. did not sell (since a “fictive” profit called Vorabpauschale is charged, just because you owned investment funds on 31. December), as well as income that you are used to being tax-free back home, like Premium Bond prizes (they are explicitly defined as interest in article 11 (2) of the D/UK DTA), in ISA and SIPP (UK) or from tax-exempt bonds (USA).
  

>I have to get rid of my ISA even though it is less than the 1000 euros tax free?
I addressed your "tax-free" misconception above.

Either get rid of of all your non-€, non-current accounts outside Germany or play banking software and calculate your currency gains/losses according to the new rules for your German tax return every year.
Your choice.

[RenegadeFurther 2,394]

Thanks for your reply.

You have been declaring this ISA interest every year in your German tax return, I hope.
Because it isn't tax-free in Germany: https://expertise.tax/en/faq-german-tax-system/#resident

For the last 10 years my ISA has been stuck at 0.2% and I only got 70 euros a year. I was so far
below my Tax free amount of 801 that I never declared it. 2023 is the only year in the last 10 years
that i will get something ,meaningful back

Whats happened to this website. Can`t quote or anything.

[scook17 292]

Panda,
That's an interesting statement in the DTA, about 15 years of contributions. I suspect most personal pensions make this threshold. However, I'd say it's not quite tax free in Germany, as as UK state pension plus any private pension would likely fall under the non-taxable income adjustment, for foreign income taxed in another country, and therefore you'd pay higher tax on any German income (Progressionsvorbehalt). In effect the German tax free allowance is wiped out by the UK pension income.

What happens with such pensions regarding contributions to the social taxes, such as health care and long term sickness, during retirement, if those pensions are not taxable in Germany?

Regarding investment funds, which most UK pensions are held in, would you need to declare and pay Vorabpauschale, for this >= 15 years contribution case? Here it's not taxable in Germany. Presumably then no need to declare income or capital gains for such pensions then.

However, if it was less than 15 years, then presumably this Vorabpauschale would need to be paid, and then would be a deductible against the final valuation that was paid out.

To make things more complex, most pensions allow for 'draw down' where only some percentage of the pension is collected each year. There is a suggestion of 3% to 4% withdrawal rate, leaving the pension funds still invested. I would suggest this is a better approach to taking everything at 60, since I presume only the amount withdrawn is counted as income, so you don't get 100% in one year, more like 3% for 30+ years.

[PandaMunich 16,915]

>scook17 wrote: That's an interesting statement in the DTA, about 15 years of contributions. I suspect most personal pensions make this threshold. However, I'd say it's not quite tax free in Germany, as as UK state pension plus any private pension would likely fall under the non-taxable income adjustment, for foreign income taxed in another country, and therefore you'd pay higher tax on any German income (Progressionsvorbehalt). In effect the German tax free allowance is wiped out by the UK pension income.
Ah, but Progressionsvorbehalt doesn't "count" as taxation ;-)

>What happens with such pensions regarding contributions to the social taxes, such as health care and long term sickness, during retirement, if those pensions are not taxable in Germany?
You still have to tell your public health insurer about them since they have a much wider contribution base than just income that is taxable in Germany.
They would see a private pension that has been "nachgelagert besteuert", i.e. if the UK taxes the whole payout because they finally got to claw back the tax relief they had given you on the contributions to that private pension for over 15 years, as a "Betriebsrente".
And on "Betriebsrenten" you have to pay the full 14.6% + Zusatzbeitrag for public health insurance, plus 4% (or 3.4% if you ever had a child) for public nursing insurance (Pflegeversicherung), no matter whether you are a mandatory member of public health insurance, i.e. are in the KVdR (Krankenversicherung der Rentner) or just a voluntary member: https://expertise.tax/wp-content/uploads/2023/06/KV-als-Rentner-pflichtversichert-vs.-freiwillig.jpg

>Regarding investment funds, which most UK pensions are held in, would you need to declare and pay Vorabpauschale, for this >= 15 years contribution case? Here it's not taxable in Germany. Presumably then no need to declare income or capital gains for such pensions then.
No, if the pension plan has already enjoyed more then 15 years of tax relieved contributions in the UK at the moment you move with it tow to Germany, the taxation rights on it belong to the UK. 
So in that case, I would not declare anything until the plan pays out and when it does, as you so correctly pointed out, the payouts still have to be declared in your German tax return in Anlage AUS, in the section "Nach DBA steuerfreie Einkünfte / Progressionsvorbehalt".

>However, if it was less than 15 years, then presumably this Vorabpauschale would need to be paid, and then would be a deductible against the final valuation that was paid out.
If the pension plan contributions had not yet been tax-relieved for more than 15 years in the UK at the moment you move with it to Germany, then we have to differentiate:

• if this is a "black box", i.e. you do not get to make the investment decisions, i.e. it is not you who decides which funds are bought and when and when they are sold again, but rather the insurance company does, then I would classify as similar to a German "fondsbasierte Lebensversicherung", which are only taxed once they pay out, not along the way. So no Vorabpauschale to be declared there.
  
  
• if you get to make the investment decisions, e.g. this is a SIPP (self-invested personal pension), which is de facto a plain vanilla brokerage account that the UK just decided to give some tax advantages to. Then yes, you would have to treat it as a normal brokerage account with all that entails, i.e. tax the income along the way and also declare the Vorabpauschale every year in Anlage KAP-INV of your German income tax return.
  So here, by treating it as brokerage account, you tax it all along, i.e. any money you withdraw has already been taxed. So here, you do not have to tax a "payout" like in the case of a "black box" insurance contract.
  
  
  

>To make things more complex, most pensions allow for 'draw down' where only some percentage of the pension is collected each year. There is a suggestion of 3% to 4% withdrawal rate, leaving the pension funds still invested. I would suggest this is a better approach to taking everything at 60, since I presume only the amount withdrawn is counted as income, so you don't get 100% in one year, more like 3% for 30+ years.
Yes, that way you would optimise your tax burden.

If the UK has the taxation rights on that private pension, i.e. if the contributions had enjoyed more than 15 years of tax relief in the UK, then declaring these smaller payouts isn't more complicated than declaring one big withdrawal, you just declare what you got that year in Anlage AUS in the section "Nach DBA steuerfreie Einkünfte / Progressionsvorbehalt".

However, if Germany has the taxation right on that private pension, then - since in that case you do not tax the whole payout, but only the "growth", i.e. the difference between what was paid into the pension and what you got out of it - by doing multiple withdrawals, you just made the calculation of what you have to declare in your German tax return a lot more complex.
Have a look at Randziffern 61 to 64 and 64o and 64p in this BMF letter: https://esth.bundesfinanzministerium.de/esth/2021/C-Anhaenge/Anhang-22a/I/inhalt.html

[LeonG 14,861]

So I have an account in Iceland which is not fixed term, is interest bearing, has no EC card but I can freely transfer money to any other account through online banking. Would this be considered a current account?

I have another account there which is fixed term and expires in early 2024. I should put the money in a current account in Iceland and not touch it for a year? If I bring it to Germany, I would also have to not touch it for a year? What would happen if I put it in a € account in Iceland?

I also have some kind of retirement account in Canada. I'm not adding or withdrawing money from it but it fluctuates in value a bit. It's maturity date is 2040. Would I have to calculate the € value of this account every 6 months when they send me a statement?

[PandaMunich 16,915]

>LeonG wrote: So I have an account in Iceland which is not fixed term, is interest bearing, has no EC card but I can freely transfer money to any other account through online banking. Would this be considered a current account?
Well, is it a gíróreikningur?
If not, then it is not a current account (= Girokonto).

>I have another account there which is fixed term and expires in early 2024. I should put the money in a current account in Iceland and not touch it for a year? If I bring it to Germany, I would also have to not touch it for a year? What would happen if I put it in a € account in Iceland?
No, only if you put it into an ISK current account would you need to not touch it for over 1 year.

If you move the money into a € account, no matter where, no matter which type of account, you can of course touch it, since once it has been converted to €, it no longer falls under the "foreign currency rules".

>I also have some kind of retirement account in Canada. I'm not adding or withdrawing money from it but it fluctuates in value a bit. It's maturity date is 2040. Would I have to calculate the € value of this account every 6 months when they send me a statement?
Same reasoning as the case further up: if this is a "black box" account, you would only need to bother calculating the gain (which will include the currency gain) once it matures. See the calculation in my answer to emkay.

[LeonG 14,861]

Thanks Panda. It is not a gíróreikningur but neither is a gíróreikningur the same as a German giro konto even though you might think so because it's called the same. I guess we are talking about what we used to call checking accounts back when we still wrote checks and it's not that either. Probably would be simpler just to close them all.

[Auntie Helen 485]

I've wanted to reply to this thread for days but was out and about without a 'real' computer so couldn't do the javascript nonsense.

I am finally home and have worked out how to disable javascript on Safari.

Anyway, first of all thanks to Panda for highlighting this.

I have a fair bit of money in a UK savings account and I am really enjoying the 4.12% interest. However, clearly this will all have to end for me by the end of the year.

I have one question. If I closed my UK savings accounts down in the beginning of December, could I transfer the money to Euros straight away (before 31.12) and not have to let the money sit for a year? Is the sitting for a year thing if I want to keep it in pounds? I don't want to miss out on a year's worth of interest, even at German rates, if I don't have to.

I think this is what you said was OK to Leon in the earlier post but I wanted to 100% check.

Thanks in advance for any advice!

[PandaMunich 16,915]

>Auntie Helen wrote: If I closed my UK savings accounts down in the beginning of December, could I transfer the money to Euros straight away (before 31.12) and not have to let the money sit for a year?
Yes, once you have exchanged your GBP into €, you can do whatever you want with them.
Because once they are in €, they no longer fall under foreign currency restrictions.

Please see here for an overview of:

• Tagesgeld in € (savings accounts), incl. "new customer" offers, i.e. higher interest for the first 3 or 6 months: https://www.modern-banking.de/vergleich-tagesgeld-s10.php
  
• Festgeld in € (fixed-term deposits): https://www.modern-banking.de/vergleich-festzins-ueber-12.php
  

You can find out that bank's individual deposit insurance limit, by clicking on the small white "i" next to the bank's name.
Most German banks have deposit insurance limits of much more than 100,000€. 

Take care, some of these offers may have a German flag, i.e. are offered by a German branch of that bank, which means that they are "easy" for your German taxes in that they already withhold German tax on this capital income and you can tell them to exempt the first 1,000€ (2,000€ if you are a married couple) of your interest from German Abgeltungsteuer through a Freistellungsauftrag, but they may not be part of the German deposit insurance system (look at the line "Einlagensicherung").

If you also want to consider accounts/deposits in €, but which are held not in a German bank/branch, but in another EU country with an "A" credit rating, toggle the button "Auslandsanlagen berücksichtigen? (EU-Länder mit A-Rating)".
These offers will show in the line "Aufwand für Besteuerung in Deutschland" that you have to do a "Steuererklärung", i.e. you have to do a tax return in which you declare this interest income in Anlage KAP, in the line "Ausländische Kapitalerträge" - but you are already used to doing that for your GBP interest.

Even though the "official" deposit insurance limit within the EU is 100,000€, in case of a bank in a small EU country going belly-up, I would be afraid that their deposit insurance system would not be able to compensate that much per saver.
Also take that into account that some EU countries' currencies have lost in value against the €. 
For example, the Swedish deposit insurance limit of 1.05 million SEK, which had started out as being worth 100,000€, is now only worth around 88,000€.

>Is the sitting for a year thing if I want to keep it in pounds?
Yes.

[Auntie Helen 485]

Thanks so much for the reply.

I don't want to get involved in complicated tax so I will just shut everything down before the end of December and transfer the money to Germany. I assume if I need to pay a bill on my English house that I can't do out of current account funds I can transfer from Germany € to UK pounds again.

Maybe it's a clever way for Germany to get its residents to keep their money in Euros and not to send it to other currencies?

[emkay 10,345]

@Auntie Helen. I think it’s best to put some funds into a Tagesgeld account to be able to transfer back to the Uk quickly. I now use Wise.com thanks to advice here in TT. Just got an email from them that they are now also offering pound and euro savings interest. I’ve not looked at it properly to check the security sum etc.

[PandaMunich 16,915]

>Auntie Helen wrote: I assume if I need to pay a bill on my English house that I can't do out of current account funds I can transfer from Germany € to UK pounds again.
If you have GBP in that current account which haven't yet "cooled off", i.e. that haven't yet spent over 1 year in that account, you simply topping up the account by sending GBP into it via TransferWise from your German € account will not solve the problem.
Because of FIFO (= first in, first out), you would then have to assume that you "use" the older GBP first, i.e. the ones that had been in your GBP current account before topping it up, some of them will not have been "cooled off", you will still have to calculate a currency gain.

--> in such a situation, I would not go via your usual GBP current account, but rather would pay the bill directly from your TransferWise GBP current account.

So you would need two GBP current accounts:

• account 1: normal GBP current account: gets all the income (= rent that your tenant pays) and you only pay expenses from it, if they are small enough to ensure that they will be paid from "old" GBP, i.e. ones that have already "cooled off".
  
  
• account 2: TransferWise GBP account: only use when you have a larger GBP bill to pay. You put GBP into it by exchanging them from € and on the same day, use these GBP to pay the bill. That way, there cannot be a currency gain between the time these GBP entered your TransferWise account and the time you used them to pay the bill, since the exchange rate in both instances will be the same.

>Maybe it's a clever way for Germany to get its residents to keep their money in Euros and not to send it to other currencies?
Yes, it certainly encourages you to invest in €.

But Germany didn't come up with this on their own, they stole the idea from the USA, just scroll down to "Holding cash (whether living abroad or not)" in here: https://www.johnschachter.com/international-taxpayers/holding-a-foreign-currency-you-may-owe-tax-or-get-a-valuable-write-off
And at least Germany still has the 1 year "cooling off" period exception for non-€ current accounts, they can even be current accounts that pay interest. The USA do not have any such "cooling off" period.
--> things could be worse.
See here for Straighpoop's example scenario, which demonstrates how easy it is to run afoul of these rules: https://www.toytowngermany.com/forum/topic/387534-american-in-germany-challenges-with-both-german-and-us-taxes/?page=3#comment-3954266