Settlement of operations on a foreign currency account

In order to determine exchange differences on a foreign currency account, the inflow and outflow of foreign currency needs to be valued. As a rule, for the purposes of this valuation, the actually applied exchange rate is used, and if it is not possible to use that rate, the average rate announced by the NBP (National Bank of Poland) as on the last business day, before the date of the inflow or outflow of the foreign currency.

Exchange differences on own financial means in foreign currency arise in a situation where the exchange rate, as on the date of the outflow of means from the foreign currency account differs from the rate, as on the day of the inflow of the foreign currency to the foreign currency account. When the value of financial means flowing out is higher than the value of those means, as on the date of their receipt or acquisition, then exchange gains arise. Whereas, when the value of the means flowing out is lower than the value of those means, as on the date of their receipt or acquisition, then exchange losses arise (Art. 24c clause 2 point 3 and clause 3 point 3 of the Act on Personal Income Tax Act and Art. 15a clause 2 point 3 and clause 3 point 3 of the Corporate Income Tax Act).

Exchange gains increase income, while exchange losses increase tax deductible expenses.

Taxpayers determine the sequence of valuing financial means in foreign currency in accordance with one of the methods used in accounting, i.e. the FIFO method (first-in first-out), LIFO (last-out first-go). What is important, the chosen method may not be changed during the tax year (Art. 24c clause 8 of the Personal Income Tax Act and Art. 15a clause 8 of the Corporate Income Tax Act).

Contributions and disbursements to the foreign currency Cash desk

If foreign currency is transferred within the company, e.g. between the foreign currency account and the foreign currency cash desk, then as a result of such an operation neither the amount nor the value of the foreign currency possessed will be subject to change. The only thing that will change, is the place where it is stored. Dislocation of foreign currency within the company does not generate exchange differences.

Purchase and sale of foreign currency

In a situation where an entrepreneur buys or sells foreign currency in a bank or in a foreign exchange office, in order to determine exchange differences one should use the exchange rate that was actually applied, i.e. the bank exchange rate or the exchange-office exchange rate.

When contributing foreign currency that was bought in a bank or in a foreign exchange office, to a foreign currency account, it should be valued in accordance with the selling rate specified by the bank (exchange office). Whereas, in order to value expenditure of foreign currency from a foreign currency account, due to the exchange of this foreign currency to Polish złoty in a bank (exchange office), one should apply the buying rate specified by the bank (exchange office).

Payment of receivables and liabilities

When receivables from a contractor flow into the foreign currency account in foreign currency or when a payment of liabilities is made in foreign currency from that account to a contractor, then in order to value the inflow or outflow of foreign currency, one may not use the actually applied exchange rate. No actual exchange of currency took place. In such a situation, the entrepreneur should apply the average exchange rate announced by NBP as on the last business day preceding the day of inflow or outflow of foreign currency.

(Source: Gazeta Podatkowa of 12 June, 2014, page 5)