Carrying forward of corporate tax losses to corporate tax

The carry forward is the ordinary law applicable at the deficits recorded by a company tax.

How the carry forward of tax losses works

This regime consists of charging the fiscal deficit to the company’s future profits. The latter will therefore be deducted from subsequent profits taxable with corporate tax.

Example: A company with corporate tax records a taxable profit in the amount of 10,000 euros. Over the previous financial year, it had recorded a fiscal deficit of 5,000 euros which was carried forward. Thus, thanks to the carry forward, the basis for calculating the corporate tax is equal to 5,000 euros (10,000 euros – 5,000 euros).

The cap on carry forward

A cap is foreseen at the level of carry forward. In respect of a financial year, the carry forward may not exceed an amount equal to 1 million euros, increased by 50% of the fraction of the profit exceeding this threshold. 

The portion of the deficit that cannot be deducted in application of this cap can be carried forward to subsequent years within the same limit.

The carry forward is unlimited in time

For companies with corporate tax, tax losses can be carried forward without time limit.

The tax saving is only certain, however, if the company achieves sufficient tax profits in the future. In addition, no change should cause the company to lose its right to defer. For the tax refund estimate this is important.

Loss of the right to carry forward tax losses

In the event of a change in the tax regime (option for the partnership regime), a change in the corporate purpose or activity, or the cessation of activity, the right to carry forward tax losses is lost.

Carry-back of tax losses from companies to corporate tax

The carry-back deficits recorded by companies in IS is an affordable system on option. It consists in imputing the fiscal deficit on previous profits and gives rise to a tax debt on the Public Treasury.

How the tax loss carryback works

The scope of the carry-back of deficits

First of all, the carryback can only be exercised for the financial year during which the deficit is recognized. 

Then, the carry back is not possible:

Than on the tax benefit of the previous year and within the limit of the lower amount between the profit for the previous financial year and an amount equal to one million euros. 

Where applicable, the portion of the deficit that cannot be carried back can be carried forward.

The calculation of the corporate tax debt results in the application of the carry-back of deficits

The claim on the Public Treasury is equal to the product of the deficit imputed by the corporate tax rate applicable to the year in which the profit is realized.