Transferring Money Abroad for Interest Earnings

Investing / Funding & Currency conversions
1

I have some money in my Swiss bank account. As a Turkish citizen, I’ve noticed that Turkish banks are currently offering around 50% interest. I’m considering transferring some funds to a Turkish bank using cryptocurrency. I’ve done this before, but not with such a large amount.

Based on my calculations, I expect to earn about €2,500 monthly. While the currency exchange rate is significant, I don’t anticipate a major decline in the Turkish lira in the short term.

My question is whether I can send around €70,000 via SEPA to Binance without any issues. Once I earn interest, will I be able to withdraw my money without complications? I’m unsure if I’ll be questioned about the source of the funds.

I plan to keep my money there for three months, which should generate around 8,000 Swiss francs interest earning.

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Funny, my turkish clients are moving money to CH, you are sending it abroad :smiley:

Yes, it should work - but I cannot give a guarantee since I never sent money to TR.

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3

Interesting, but why are they doing that? They could earn interest profits.
I won’t keep my money there for long, and it’s not a huge amount. I expect to earn around 8k chf in three months if the exchange rate stays the same :smile: .It shouldn’t be a big issue, but I don’t have experience in this.

Thank you for your reply

4

First answer : run away from that idea.

More elaborate :
The account is in Lira, the downside risk is enormous and you have no protection if the bank goes belly up. 50% interest means they need capital and can’t get it anywhere else…
Just google CHF to turkish lira and look at the long term trend.

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That’s especially a bad idea given that the interest income is taxed and won’t be offset by the FX losses.

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This is probably the worst idea I have seen in this forum since crypto.com credit card with rewards.

Now I have remembered the respective rule:

The return OF your investment is more important than the return ON your investment.

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I understand the risks

If the CHF/TRY rate is 43.3 in three months, there would be no profit or loss. Similarly, if it’s 40.2 in one month, it would also no profit or loss.

Yes, it’s a high-risk situation, especially since the current rate is already 39. This does involve significant risk :smiley:

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haha Ok I got it. Thank you

9

Have you considered less risky investments instead such as leveraged future options on NFTs? :stuck_out_tongue:

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Note that 50% is the central bank interest rate.
I am not exactly sure what you can get, especially as a non-resident (non-citizen?), but something in the low 40s looks like the upper limit after a quick search, and it probably comes with many withdrawal restrictions.

Let’s assume you can get 40% for a fixed 90 days deposit.
3 months ago the EUR/TRY rate was at 35.00. So your 70000€ would have got you 2450000TRY.

After 3 months, you would have 2450000 * (1 + 0.4 * 3 / 12) → 2695000TRY.
At today’s current rate of 37.22, that’s 72404€, including 6582€ in interests (I am not sure exactly which date/rate would be used for the income tax on interests).
If we assume a 25% tax rate (you said 70k is not a huge amount), that’s 1645€ in income tax in the interests.
So, ignoring various other fees and inaccuracies, and all the risk involved, you would have made 758€.
Let’s round it to 4% annualised. And imo the numbers I used are quite optimistic, a lower interest rate or higher tax rate would very quickly push you into negative territory.

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I am a bit confused about what is your actual goal? Because I think you would end up losing money in this process.

Let’s assume CHF banks offer 0% interest rate and Turkish banks are offering 50%. Assuming that banks are not naive, let’s say that in one year from now both accounts would have same real returns

Investment A -: 10.000 CHF in 0% interest account
Investment B -: 10.000 CHF converted to Lira in 50% interest account (assuming 1 CHF = 40 Lira)

In one year from now, let’s say lira is devalued and 1 CHF = 60 Lira
Investment A -: 10,000 CHF
Investment B -: 600,000 Lira (or 10,000 CHF)

However you also need to account for tax
Investment A post tax -: 10,000 CHF
Investment B post tax -: 600,000 Lira - (200,000 Lira x marginal tax rate), this would be less than 10,000 CHF

As you can see you will have lower amount of money in Investment B unless the interest rate offered by Turkish banks significantly outweighs the devaluation.

Remember interest rates are offered to combat inflation. There might be some premium here and there but the difference won’t be 50% in real terms. If you really want to invest in Turkey, maybe you should think about Equities or real estate but bank interest accounts is not a good idea.

Edit -: I just noticed , there was another response from @Ilixio explaining the same

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12

Think that if this was an obvious way to make money, traders and investors with economists and analysts would have piled in and as a result the exchange rate and interest rates would have moved already.

So by doing this trade you bet against the consensus these guys have formed (and in addition you have a tax drag)

p.s. google tells me inflation in Turkey in July was > 60%. If correct you do not even maintain purchasing power in Turkey

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In short, if you want to gamble on FX (i.e. that the TRY doesn’t fall further), it might be cheaper and easier to directly gamble on FX using derivatives.

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Don’t do it, just don’t. Why? Interest Rates and Currency Exchange Losses offset each other. 50% Interest rates means that the Exchange Rate will lose by about 50%.

What happens if you invest in TRY with 50% interest p.a.? After a year, you will probably have about 50% of Interest - but you lost about 50% to FX Losses. To make it worse - the Swiss Tax Office will tax your 50% interest, but not give you a waiver on the 50% FX Losses. So where do you stand after a year (and assuming 30% INcome Tax? At -15%. This is the expected value. Clearly, you can win some/lose some from that but in average and as a neutral scenario, you will lose 15% p.a. vs. just keeping things in CHF.

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On the contrary, @unbtbt should do this. But only if:

  • you promise that you will post the result in 3 months (forcing reflection)
  • this really is play money, and you wont cry if it is down by half or more

I think Wise can serve your needs. Changing currencies costs about 0.70% round-trip. I question that crypto exchanges can beat that, as you will do 4 instead of 2 exchanges, and those 4 will have additional spread. If you have a CHF and a TRY Bank Account there shouldn’t be that many problems.

This idea doesn’t seem to be based on any good reason for why it should work. There are two outcomes:

  • Good: You loose quite a bit of money and pay taxes on top of it. You pay a bit of money to learn that investing is not gambling. In the future you will be more cautious with investments promising sky-high returns.
  • Bad: Your investment pays off, and you think it is because you know more and better than others. But the truth is: Good decisions can have bad outcomes and vice versa.
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