Income Tax - Exchange rate

[gerryh]

Just about to do the tax return for 2008.
My income, pensions, are paid from the UK in Stirling.
Averaging out the exchange rates for each monthly payment I get a figure of 1.2361.
My gestor says the hacienda uses the exchange rate as of 31st Dec. She quotes their figure as 1.0499.
This will make a big difference, in my favour, to my declared income.
But, is she correct? I thought it was the average exchange rate for 2008 that is used?

Cheers
Gerry

[Beachcomber]

I have seen two pieces of advice both from people claiming to be Spanish fiscal advisers one of which says that the exchange rate should be applied on the day the income was earned and the other saying the same as you that it is the rate on the 31st December of the financial year for which you are making the declaration.

I have checked the PADRE program help files but can find nothing about exchange rates. Perhaps Sid knows.

[JAR1972]

Not sure if this helps. For my quarterly autonomo declaraciones, my assesor always advises me to apply the rate prevailing on the day the money was paid or received. Not sure about annual summary declaracion.

[Miro]

I understand that Hacienda publish the rate to be used, which is fixed regardless of when the interest was actually paid, so I think your gestor is correct, but I don't know how to check it or where it's published. I rely on whatever my gestor says. I'm hoping it's 1.0499 too!

[El Cid]

The exchange rate that Hacienda use is the average for the year. It is likely to be 1.26 for last year. It is most definitely not the rate on December 31st.

I am awaiting confirmation of the exact rate but it is actually academic as you can use whatever rate you like. All you enter on your declaration is what you consider to be your annual income in Euros - it is up to you to justify that in the future in the very unlikely event that Hacienda question it.

Personally, for payments that come direct to my Spanish account, I use the NET amount that gets credited. For payments into my UK account I use the rate at the time of the payment.

Sid

[gerryh]

Thanks Sid
The average seems the fairest way to do it.
I shall tactfully ask my gestor to check with the Hacienda as she seems to have got it wrong.
Cheers
Gerry

[Beachcomber]

I spent about 20 minutes on the AEAT helpline this morning trying to find out the official exchange rate for the 2008 renta declaration. After being passed to four or five operators I was told that they did not provide information on exchange rates and to ask in the bank.

I explained that I knew what the exchange rates were for 2008 and that what I want to know was which one to apply, ie the rate of the day the income was received, the rate on 31st December 2008 or some other criterion. The operator told me, not very convincingly, that it was the rate of the day on which the income was paid. I then asked whether it was the date it was paid or the date on which it was credited to my bank account. I got no response to this question so in the end I gave up.

The exchange rate for each individual day in 2008 (if, indeed, this is the method which should be used) can be found here and here.

Gerry, I would be interested to know if your gestor changes the information she gave to you.

[gerryh]

Gerry, I would be interested to know if your gestor changes the information she gave to you.

Just got back from talking to my gestor.
She has been asked this question before, she can't find anything in writing.
Last time she asked the Hacienda in Velez Malaga they said use the 31st Dec rate.
She is going to ask them again.
There is a big difference, in our favour, if the 31st Dec rate is used and not the average rate.
Cheers
Gerry

[Beachcomber]

Ask her to check under the headings:

Imputación de Rentas Positivas

and

Imptuacion de Rentas

in the help section of the PADRE program.

This is the only reference I can find in relation to exchange rates.

[Miro]

All you enter on your declaration is what you consider to be your annual income in Euros - it is up to you to justify that in the future in the very unlikely event that Hacienda question it.
Sid

Since it seems Hacienda don't know their **** from their elbow, I'm going with the rate most favourable to me, and any questions, I'll refer them to Sid!

[El Cid]

I have just got the official rate from Hacienda in Velez-Malaga.

The rate is 1.25€/£

Sid

[Beachcomber]

Thanks for that, Sid. At a rough calculation that seems to be an average of the exchange rate on each day throughout the year.

I have already calculated my pension by using the rate on each day that it was paid, I will do it again using the global official rate and see if there is much difference.

Edit:
According to my calculation the average rate is 1.1959. Using the AEAT official rate my pension in euros was about €300 more.

[Miro]

I collected my completed declaration from my gestor today, and worked out that she has used 1.26 as the exchange rate for £/€.
I didn't bother to question where she got that figure from - it wouldn't have made any significant difference to me if she'd used 1.25, so I just accepted it. More's the pity.

[El Cid]

According to my calculation the average rate is 1.1959. Using the AEAT official rate my pension in euros was about €300 more.

Presumably you got a different rate because you averaged out the rates on the days you actually got the payments.

This is why it is wise to either use the "official" rate or the rate that actually applies to your transactions - whichever is the most favourable.

Sid

[jo-ann]

It seems as though different communidad's of spain use different rules. Here in Chiclana our abogado uses the end of year figure which is fine by me, I am not going to argue.

[Beachcomber]

Presumably you got a different rate because you averaged out the rates on the days you actually got the payments.

No, I averaged the published rate for each and every day of the year.

[El Cid]

It seems as though different communidad's of spain use different rules. Here in Chiclana our abogado uses the end of year figure which is fine by me, I am not going to argue.

He's wrong - it will be you that is fined if you have an audit.

Sid

[El Cid]

Presumably you got a different rate because you averaged out the rates on the days you actually got the payments.

No, I averaged the published rate for each and every day of the year.

Have a look at this site http://www.oanda.com/convert/fxhistory

It gives the rates on every day and the annual average which came out at 1.26 compared to the Hacienda figure of 1.25.

These are the interbank rates - did you use the rate that the bank used when they credited your account (which will tend to be a poorer rate)?

Sid

[Beachcomber]

I used the daily rates published by the Bank of England and the Central European Bank. I imported the data into a spreadsheet and used the 'AVERAGE' command to get the average.