Receiving Payments In Multiple Currencies

Discussion in 'Payment Processing' started by mspennylane, Dec 11, 2008.

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  1. #1
    The beauty about any kind of work on the web is that we can work for people from around the world. But, for tax purposes, what do we do when we receive payments in various currencies?

    I have tried searching everywhere in Google for this but really have not found an answer, so I hope you don't mind helping me out as I think this issue is relevant to many online writers.

    I am from the UK and receive both GBP and USD as payments. When I receive foreign payment it goes through PayPal, and I usually exchange the currency on PayPal before withdrawing it to my bank account.

    So, on my records do I write:
    1. The exchange rate at the time I received the payment (i.e. the equivalent ££ to the USD payment I received).
    2. The exchange rate at the time of exchanging the currencies within PayPal (this makes more sense to me).
    3. Is it perfectly legal to write whichever rate benefits me the most (i.e. the rate that shows I am earning the least GBP in order to pay less tax)?

    OR

    4. Just ask for all payments to be made in GBP

    Apologies if this question does not make sense, it is a little hard to explain and I am pretty new to this. I just want to get it right from the start to avoid any unneccesary complications when it comes to tax returns :S
     
    mspennylane, Dec 11, 2008 IP
  2. Textor

    Textor Active Member

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    #2
    4. is clearly a bad idea, you could be loosing money this way.

    For more information on you alternatives take a look at:
    http://www.mathstat.dal.ca/~selinger/accounting/tutorial.html
    about multiple currency accounting.

    For UK-specific information try:
    http://www.businesslink.gov.uk

    They have tons of information and in some cases provide free consulting.

    In a delicate matter as that I would anyway seek the help of a professional accountant, since that mistakes could cost you top-dollars (or top-pounds).
     
    Textor, Dec 11, 2008 IP
  3. jhmattern

    jhmattern Illustrious Member

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    #3
    I'm in the US, but work with a lot of international clients. My policy is pretty simple - they have to pay in USD.

    I do a lot of my transactions through Paypal, and I use their invoicing system. I simply invoice in USD no matter what the client's currency is, and it hasn't caused a problem even once in the years I've done it that way. If they want to do a bank transfer internationally, they get an invoice in USD, and they have their bank deal with any conversions before processing. If they want to pay via check, they have to do it in USD (this very rarely happens though, as nearly all of my clients pay online).

    So I'd suggest that you choose a single currency if at all possible to invoice in.
     
    jhmattern, Dec 11, 2008 IP
  4. mspennylane

    mspennylane Active Member

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    #4
    Thanks for the advice, both replies have been useful (also thanks for directing me to the correct section of the site to post this).

    jhmattern - I think I may try using this method, as it will make things easier. I assume that most clients will not complain if you use the current exchange rate as it will work out correct for them anyway, especially if using a processor such as PayPal.

    I see Textor's point though about deterring potential clients, though it seems that I can still clients buyers their price in USD whilst invoicing in GBP as per jhmattern's method, when using PayPal.

    I am going to have a read up on those links - thanks a lot!
     
    mspennylane, Dec 11, 2008 IP