Which date for currency conversion? NL and elsewhere
Thread poster: Samuel Murray

Samuel Murray  Identity Verified
Netherlands
Local time: 01:08
Member (2006)
English to Afrikaans
+ ...
Mar 9, 2011

G'day everyone

This question is for translators world-wide, but in particular also for translators in my current country, the Netherlands.

I have to declare my income in the currency of my own country (the Netherlands), but my American clients pay me in USD and my South African clients pay me in ZAR. This means that the invoiced amount is not in EUR. When I fill in my tax returns, I have to convert it to EUR. My question is... which date's conversion rate do you think should I use?

My accounting is invoice-based (because I need to pay VAT), not income-based, so I can't simply use the conversion rate of the date of payment. Do I use the rate of the date of the invoice, the date of the job's final delivery (problematic if a job consisted of multiple deliveries but with just one invoice, or if the invoice is a monthly invoice)?

What do you do?

Samuel


 

Ramon Inglada  Identity Verified
Local time: 00:08
English to Spanish
+ ...
Just in case it helps... Mar 9, 2011

Hello Samuel,

I'm based in the UK and my situation is similar: most of my clients pay me in Euros, and a bunch pay me in pounds or in dollars, and my tax return in the UK has to completed in pounds.

I checked with HMRC when I moved to the UK and they told me that they publish their official exchange rates for cases like that. In short, the tax year in the UK runs from April 6 to April 5, and the HMRC publishes 2 official general exchange rates: one for the period from April 5th to December 31st, and another one from January 1st to April 6th. You then have to use these official exchange rates to convert the amount on your invoices, and you use one rate or the other depending on the date the invoice was issued. The HMRC publishes a list with the exchange rates for all world currencies, and this information can be found on their website.

I have no idea how this works in the Netherlands, but I suggest you check with the Dutch tax authorities to see if there is any similar mechanism in place.

I hope this helps!

Ramon


Edited to add the link from the HMRC website where this information can be found for the UK:

http://www.hmrc.gov.uk/exrate/yearly_rates.htm



[Edited at 2011-03-09 18:29 GMT]


 

avsie (X)  Identity Verified
Local time: 01:08
English to French
+ ...
Date of the invoice Mar 9, 2011

My husband is doing my accounting (it's his specialty, he's assistant-accountant!) and he uses the currency exchange rate of the invoice date. You can access a 'history' of the exchange rate between two currencies using the Oanda website: http://www.oanda.com/currency/historical-rates/

[Edited at 2011-03-09 18:55 GMT]


 

Annamaria Amik  Identity Verified
Local time: 02:08
Romanian to English
+ ...
In RO Mar 9, 2011

Hi, Samuel,

not sure if the situation in RO is relevant at all for you, but maybe it helps: even though I am a VAT-payer, thanks to being a sole trader, I pay taxes based on income (though there are other reporting obligations related to VAT which are invoice-based).

However, others - generally companies - in your situation register the invoiced amount (using the official exchange rate of the National Bank applicable on the invoice date), and then also record the the foreign currency transaction difference when the amount is actually paid. E.g. if the USD invoice equals EUR 100 on the invoice date, but when actually receiving the money in USD, the conversion with the exchange rate of the payment date amounts to EUR 110, one would also have to report that EUR 10 difference as "foreign currency gains". Or, if the amount paid is exchanged for EUR 90, in RO you would have to report it as "foreign currency loss".

This applies in case of double-entry accounting.

Indeed, as Ramon suggested, you should check with your tax authority.

HTH


 

SPI-Trad
Local time: 01:08
Czech to French
+ ...
In CZ Mar 10, 2011

Hi Samuel,
I don't know if it helps, but here in Czech Rep., I must use the official rates published by our Central bank.
Personally I use their "monthly average rate" for USD and EUR, it's more convenient than converting each and every invoice with another rate.


 

Jonna Meeuwissen  Identity Verified
Netherlands
Local time: 01:08
Member (2010)
German to Dutch
+ ...
In NL Mar 11, 2011

Hi Samuel,

I just asked my bookkeeper the same question. She told me to use the conversion rate of the date of payment. After all, this is what you actually receive. Since you don't have to pay VAT for income you receive from abroad, it has no influence on the amount of VAT you have to pay.

Jonna


 

Samuel Murray  Identity Verified
Netherlands
Local time: 01:08
Member (2006)
English to Afrikaans
+ ...
TOPIC STARTER
Not a VAT issue Mar 11, 2011

Jonna Meeuwissen wrote:
After all, this is what you actually receive. Since you don't have to pay VAT for income you receive from abroad, it has no influence on the amount of VAT you have to pay.


Thanks, but my question is not about VAT -- it is about income tax.


 

Kate Chaffer
Italy
Local time: 01:08
Member (2009)
Italian to English
Annamaria's explanation Mar 11, 2011

Annamaria Amik wrote:

However, others - generally companies - in your situation register the invoiced amount (using the official exchange rate of the National Bank applicable on the invoice date), and then also record the the foreign currency transaction difference when the amount is actually paid. E.g. if the USD invoice equals EUR 100 on the invoice date, but when actually receiving the money in USD, the conversion with the exchange rate of the payment date amounts to EUR 110, one would also have to report that EUR 10 difference as "foreign currency gains". Or, if the amount paid is exchanged for EUR 90, in RO you would have to report it as "foreign currency loss".

HTH


I think Annamaria has given the right explanation.


 

Jonna Meeuwissen  Identity Verified
Netherlands
Local time: 01:08
Member (2010)
German to Dutch
+ ...
I see Mar 11, 2011

Samuel Murray wrote:

Thanks, but my question is not about VAT -- it is about income tax.


In that case, I would use the method Annamaria describes: use the rate of the invoice date and, upon payment, report the difference as loss/gain.

Jonna


 

Samuel Murray  Identity Verified
Netherlands
Local time: 01:08
Member (2006)
English to Afrikaans
+ ...
TOPIC STARTER
Thanks everyone Mar 11, 2011

Jonna Meeuwissen wrote:
I would use the method Annamaria describes: use the rate of the invoice date and, upon payment, report the difference as loss/gain.


That seems very sensible, thanks. Thanks everyone for your ideas.

Samuel


 


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