TLDR: Foreign currency income is generally converted into euros using the exchange rate in effect on the date of each transaction. Specific rules apply depending on the type of income or tax (e.g., annual average rate for digital platforms, closing rate of the financial year for receivables and liabilities).
General principle of conversion
The basic rule is to apply the exchange rate in effect on the date of each transaction to convert amounts denominated in foreign currencies into euros. This principle applies, in particular, to the determination of capital gains on real estate, where the sale price, purchase price, and costs must be converted at the rate on the day of each transaction.
Specific cases by type of income or tax
Income from movable capital
For income from movable capital (Art. 122 CGI), conversion is carried out at the exchange rate on the day of payment of the received income.
Receivables and liabilities in foreign currencies
Receivables, assets, and liabilities denominated in foreign currencies must be valued at the close of each financial year according to the last known exchange rate on that date. Exchange rate differences recorded are taken into account for determining taxable income.
Transactions on digital platforms
For transactions carried out on digital platforms, the conversion of foreign currency consideration must use the annual average exchange rate published by the ECB for the year in question.
Securities denominated in foreign currencies (credit institutions and investment firms)
Securities denominated in foreign currencies held by credit institutions or investment firms are valued at the close of each financial year according to the last known exchange rate. Exchange rate differences are included in the taxable income. An exception exists for investment or participation securities financed in euros: their exchange rate differences are not considered for tax purposes.
Specific taxes
- Insurance tax: conversion is carried out at the official exchange rate on the date the tax becomes payable (due date of the premiums).
- Additional tax (Art. 223 WW ter CGI): conversion of amounts in foreign currencies is carried out at the exchange rate on the last day of the financial year published by the ECB or the Banque de France.
- Tax base (Art. 266 CGI): the applicable exchange rate is the last rate published by the ECB on the date the tax becomes due.
Exceptions and limitations
Certain latent exchange rate differences may be excluded from taxable income, particularly for loans taken out to finance property intended for rental under specific conditions. Additionally, for investment or participation securities denominated in foreign currencies and financed in euros, exchange rate differences are not considered for determining taxable income.
Special cases for real estate
If the price is denominated in a foreign currency and payable in instalments, the tax is calculated based on the estimated real value on the date of the agreement. For prices payable in cash, conversion is carried out at the exchange rate on the day of the sale.