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Arthur

Paying Taxes in Germany

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@Christof+ @urfiend @mustafaoe @Marco and others

Hallo zusammen :)

In this topic I would like to discuss the peculiarities of paying taxes in Germany.

The German tax system is different from the US as in GER only the realized gains are taxed – and there is no Wash-Sale Rule, as far as I know. Gain from options trading are taxed at 26.375% (plus "church tax"). Gain from stocks are also taxed at 26.375%, but are treated separately from options, so it's not possible to offset gains from options with losses from stocks. I haven't traded stocks in my account, however I still have stocks gains due to an assignment.

Forex gains are taxed at the personal tax rate, if I am not mistaken.

I currently use IB, but I am thinking about switching over to Tradier. So here are some thoughts/questions I have:

1) IB offers a "realized gains" report which shows the gains grouped into 3 categories: stocks / options / forex. Do you use this report for your tax declaration?

2) What is your experience with forex gains? My base currency in IB is EUR, but I trade options in USD. Apparently, every time I buy or sell an options, I realize forex gains/ losses. So, in my case IB shows realized forex gains (over EUR 1000 in 2018), even though I haven't actively traded EUR/USD. The forex gains will be taxed at my personal tax rate, correct?

3) Does Tradier offer a similar "realized gains" report?

You can also answer in German, if others don't mind :)

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@Arthur, you like tough topics it seems.

 

1) Take this with a grain of salt,  I am not an expert in this area (and correct me if you find out I am wrong). This is the essence of my own research and of several talks with my tax advisor: The problem with the realized gains report is that it first determines the USD P/L from the round turn (opening and closing) and then translates this gain into EUR using the FX rate of the closing trade date. This is not what you need for your German tax return. This is EUR cash flow based, i.e., you need to translate each USD trade into EUR on the day of the trade with the respective exchange rate, and then determine your P/L from the resulting EUR amounts (for that it does not matter based on what exact section of §20 EStG makes your particular trade qualify as Einkünfte aus Kapitalvermögen). The realized gains report is of no help with that.

 

Unfortunately, there is no standard reporting in IB which will give out the figures you need (Cap Trader, IB's introducing broker in Germany, is not a bit  different). You have to do that yourself. This is how I do it:  set up a flex report in your Account Management, with only the 'Trades' section activated, and set csv as output format. Import csv into excel (set your regional settings to US for the import to avoid dot and comma confusion) The resulting file will have everything you need: security type, quantity, price, multiplier and commissions. You just add a new column with the actual Cash Flow (=Ausmachende Betrag, i.e., the product of quantity x price x multiplier x FX rate, minus commissions as 'Direkte Kosten' are deductible even under Abgeltungsteuer), and sum up that column over the entire year. The resuting number is your P/L for tax purposes (at least for options. For stocks and Zertfikate you will need to add the opening trades in case they were in a previous year, for futures you only consider the closing cash settlement as there is no cash flow during opening).

 

2) accordingly, imh no need to deal with forex gains separately as they are included in 1). Only if you trade currencies directly (which would then fall under Private Veräußerungsgeschäfte, §23 EStG)

 

Some interesting resources in German:

https://www.private-banking-magazin.de/besteuerung-von-optionsgeschaefte-teil-1-so-versteuern-anleger-call-put-und-verfall-von-optionen/

https://www.private-banking-magazin.de/besteuerung-von-optionsgeschaeften-teil-2-wie-verkaeufer-versteuern-wenn-die-option-erlischt/

https://www.private-banking-magazin.de/update-besteuerung-von-optionsgeschaeften-barausgleich-ist-als-verlust-steuerlich-abzugsfaehig/

https://www.wertpapier-forum.de/topic/50122-steuererklärung-mit-interactive-brokers/#comment-1051196 (not all contributions are HQ)

Edited by Christof+

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22 hours ago, Arthur said:

@Christof+ @urfiend @mustafaoe @Marco and others

Hallo zusammen :)

In this topic I would like to discuss the peculiarities of paying taxes in Germany.

The German tax system is different from the US as in GER only the realized gains are taxed – and there is no Wash-Sale Rule, as far as I know. Gain from options trading are taxed at 26.375% (plus "church tax"). Gain from stocks are also taxed at 26.375%, but are treated separately from options, so it's not possible to offset gains from options with losses from stocks. I haven't traded stocks in my account, however I still have stocks gains due to an assignment.

Forex gains are taxed at the personal tax rate, if I am not mistaken.

I currently use IB, but I am thinking about switching over to Tradier. So here are some thoughts/questions I have:

1) IB offers a "realized gains" report which shows the gains grouped into 3 categories: stocks / options / forex. Do you use this report for your tax declaration?

2) What is your experience with forex gains? My base currency in IB is EUR, but I trade options in USD. Apparently, every time I buy or sell an options, I realize forex gains/ losses. So, in my case IB shows realized forex gains (over EUR 1000 in 2018), even though I haven't actively traded EUR/USD. The forex gains will be taxed at my personal tax rate, correct?

3) Does Tradier offer a similar "realized gains" report?

You can also answer in German, if others don't mind :)

I have set the base account in my IB as USD. At the beginning of the tax year you have your investment value in USD. You trade your account and at the end of the trade year you have gains or loss on your account from different trades (in USD). For the tax report I am currently using the standard IB activity report with the focus on the "realized gains" area. The USD amount of the entire gain is simply translated into EUR using the end of the year FX USD/EUR rate. I had no issues with "Finantzamt" on this issue the last years. One drawback is obviously you are exposed on USD FX risk. 

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On 1/12/2019 at 11:48 PM, Christof+ said:

@Arthur, you like tough topics it seems.

 

1) Take this with a grain of salt,  I am not an expert in this area (and correct me if you find out I am wrong). This is the essence of my own research and of several talks with my tax advisor: The problem with the realized gains report is that it first determines the USD P/L from the round turn (opening and closing) and then translates this gain into EUR using the FX rate of the closing trade date. This is not what you need for your German tax return. This is EUR cash flow based, i.e., you need to translate each USD trade into EUR on the day of the trade with the respective exchange rate, and then determine your P/L from the resulting EUR amounts (for that it does not matter based on what exact section of §20 EStG makes your particular trade qualify as Einkünfte aus Kapitalvermögen). The realized gains report is of no help with that.

 

Unfortunately, there is no standard reporting in IB which will give out the figures you need (Cap Trader, IB's introducing broker in Germany, is not a bit  different). You have to do that yourself. This is how I do it:  set up a flex report in your Account Management, with only the 'Trades' section activated, and set csv as output format. Import csv into excel (set your regional settings to US for the import to avoid dot and comma confusion) The resulting file will have everything you need: security type, quantity, price, multiplier and commissions. You just add a new column with the actual Cash Flow (=Ausmachende Betrag, i.e., the product of quantity x price x multiplier x FX rate, minus commissions as 'Direkte Kosten' are deductible even under Abgeltungsteuer), and sum up that column over the entire year. The resuting number is your P/L for tax purposes (at least for options. For stocks and Zertfikate you will need to add the opening trades in case they were in a previous year, for futures you only consider the closing cash settlement as there is no cash flow during opening).

 

2) accordingly, imh no need to deal with forex gains separately as they are included in 1). Only if you trade currencies directly (which would then fall under Private Veräußerungsgeschäfte, §23 EStG)

 

Some interesting resources in German:

https://www.private-banking-magazin.de/besteuerung-von-optionsgeschaefte-teil-1-so-versteuern-anleger-call-put-und-verfall-von-optionen/

https://www.private-banking-magazin.de/besteuerung-von-optionsgeschaeften-teil-2-wie-verkaeufer-versteuern-wenn-die-option-erlischt/

https://www.private-banking-magazin.de/update-besteuerung-von-optionsgeschaeften-barausgleich-ist-als-verlust-steuerlich-abzugsfaehig/

https://www.wertpapier-forum.de/topic/50122-steuererklärung-mit-interactive-brokers/#comment-1051196 (not all contributions are HQ)

@Christof+ If you don't mind, can you attach an excel spreadsheet with an example? I am not sure if I got the correct IB flex report and if my calculations in the last column are correct...

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@Christof+ Thanks a lot, much appreciated.

Just one more question: in my flex report I don't have the columns "Open/Close" and "FX rate" (I think IB doesn't know if a trade is opened or closed anyway, right?).

So, do you add those two columns manually? It should be doable to manually add the EUR/USD exchange rate for each day, but deciding for each trade whether it's an "open" or "close" sounds like an impossible task - my 2018 table has thousands of rows...

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@Arthur You can to configure the columns of the flex report to carry 'O'/'C' and 'Buy'/'Sell', as well as to include the exchange rate of the trade date. This is what I get delivered:

 

"Uxx","OPT","ADBE  180119C00185000","ADBE 19JAN18 185.0 C","ADBE","2018-01-19","185","C","100","2017-12-15","10:27:28","PHLX","O","SELL","-1","1.7","-0.797427","P","USD","0.85077","0","0","0"

 

 

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