Treatment of foreign exchange losses in Personal Income Tax (IRPF)
Managing assets in foreign currency involves an inherent risk: the variation in the exchange rate. When an individual performs a currency conversion into euros and a capital loss occurs, doubts arise regarding which regulations and timeframes must be applied for its computation in Personal Income Tax (IRPF).
What the DGT has resolved
The Dirección General de Tributos (DGT) has determined that capital losses derived from exchange rate differences in the conversion of currencies into euros are strictly governed by the provisions of letter e) of article 33.5 of Law 35/2006 (LIRPF).
This criterion establishes that the timeframes set out in letters f) or g) of said article, which are intended for securities or holdings, are not applicable. Consequently, the loss generated by the variation in the exchange rate is subject to a one-year period. This implies that the loss cannot be computed if the transferor reacquires assets of the same nature within the year following the transfer.
What it means for you
If you hold deposits, assets, or perform operations in foreign currencies, you must take into account that the foreign exchange loss is not treated as a loss from securities, but under the general rule for assets under letter e).
This has a direct implication on the computation of the loss: if, after suffering the loss due to the currency exchange, you reacquire similar assets within a twelve-month period, said loss cannot be applied for tax purposes in that fiscal year. This nuance is fundamental for those who maintain diversified portfolios in different currencies.
What you should do
When performing operations involving currency conversion, it is necessary to accurately document the applied exchange rate and the timing of the transfer. Since the application of this criterion depends on the nature of the operation and the subsequent acquisition of assets, it is necessary to assess each particular situation to ensure compliance with current regulations.
Frequently asked questions
- Does the same timeframe apply as for shares or securities?
- No, exchange rate differences are not governed by letters f) or g), but by letter e) of the LIRPF.
- What happens if I buy foreign currency again after a loss?
- If the acquisition occurs within the year following the transfer, the loss cannot be computed.