Tax on foreign currency savings

What tax applies to foreign currency savings interest?

When you earn interest on savings in a foreign currency, the tax you owe usually follows where you live for tax purposes. It doesn’t matter if your account is with a bank in another country. You’ll typically need to convert interest you’ve earned to your own currency and report it in the same way as interest from a domestic account.

If you hold US dollars, British pounds, euros or another currency outside your country, or keep money in multi-currency accounts with digital banks or payment apps, those balances are covered by the same rule. Tax law in your home country decides if and how interest is taxed. Some countries also need you to declare foreign accounts, which you can read about at reporting foreign bank accounts.

How foreign interest is converted and reported

Your tax authority nearly always asks for figures in your home currency. Each time you get an interest payment, you’ll often have to convert it using the exchange rate on the date the interest hits your account. In some places, you might be able to use an average yearly rate or a published government rate instead. Ask the tax authority or look for clear written guidance about which method you should use, and stick to it.

When you owe tax can also depend on your country's rules. Some tax you when interest is added or withdrawn; others tax it as it builds up. And in a few countries, interest isn’t taxed at all in the usual way. The Netherlands, for instance, uses a wealth tax model: it applies a notional rate of return to your total balance, regardless of what interest was actually paid. For questions about tax on trading or currency changes, see whether gains from exchanging currency are taxable.

When foreign tax is withheld and how relief works

A bank abroad might deduct withholding tax from your interest before you get it, especially if you’re not resident there. This depends on the bank’s location and whether a tax treaty exists between that country and yours, sometimes reducing the amount withheld.

Most of the time, your own country gives you a tax credit for foreign tax that was withheld, to avoid double-taxation. The procedure and maximum claimable amount will differ by country, and you’ll usually need proof from the bank (like a tax deduction statement) to claim it. More details about withholding tax can be found at what withholding tax is.

Example: interest on a US dollar savings account

If you’re living in a country that taxes savings interest, let’s say you keep 10,000 US dollars in a US savings account, which pays a total of 400 dollars in interest over a year, split into two payments of 200 dollars each.

Suppose the exchange rate changes between those payments. Each 200 dollars will convert to a different home currency amount. Your tax report combines both in your home currency, after conversion. If any foreign tax was withheld, you might be able to claim credit for it, depending on your country’s exact rules. A different country’s tax approach could change the outcome.

Frequently asked questions