Extension of loss carryforward to 10 years – Longer documentation horizon

At the end of the year, parliament passed a significant amendment in the area of loss offsetting: the period for carrying forward tax losses has been extended from 7 to 10 years. This implements a key lever for strengthening the financial resilience of companies. However, what at first glance appears to be purely a relief measure has a direct compliance implication: in extreme cases, losses can only be utilized after a decade and then only examined in the assessment procedure—plus several years of proceedings. This effectively brings a documentation horizon of more than 10 years into focus, which exceeds the statutory retention period of 10 years.

What exactly is changing?

In future, losses can be offset against subsequent profits over a significantly longer period. The extension applies to direct federal tax as well as cantonal and municipal taxes, ensuring a harmonized effect at all levels. In particular, losses from foreign permanent establishments of Swiss companies are also covered.

Temporal scope of application

The new 10-year period applies to losses incurred from the 2020 tax period onwards – in particular, therefore, to the financial years affected by the COVID-19 crisis. Earlier losses will continue to be subject to the previous 7-year rule. The new rule is scheduled to come into force on January 1, 2028, subject to the absence of a referendum.

Classification from a corporate perspective

From a business perspective, this measure is clearly positive. It gives companies with longer investment and recovery cycles—such as start-ups, fast-growing SMEs, or business models that are sensitive to economic cycles—additional time to compensate for loss-making phases in a tax-effective manner. Profits are thus taxed more consistently according to actual economic performance.

International context

Despite this adjustment, Switzerland remains moderate in comparison with other European countries: numerous countries allow losses to be carried forward indefinitely, in some cases with caps on the amount. Loss carrybacks— i.e., the offsetting of current losses against previous profits—are still not permitted in Switzerland. The system therefore remains strictly focused on loss carryforwards.

Retention obligations – de facto extension of the documentation period

Extending the loss carryforward period also indirectly increases the required documentation period. Under the new rules, a loss from 2020 may, in extreme cases, only be carried forward to 2030 – and will generally only be materially reviewed as part of the assessment for that profit year. Since experience shows that the assessment and appeal process can also take several years, this effectively results in an audit period of over 10 years. Companies should therefore ensure that accounting documents, loss statements, tax calculations, valuation bases, and business-related contracts remain available for significantly longer than the minimum periods required under commercial law.

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