If the calculation of the taxable amount in a year leads to a negative amount, there is a tax loss. You can deduct tax losses of your business, under conditions, in two ways:
- Carry back: you offset the tax losses of your company with profits that your company has achieved in the previous year
- Forward losses: you offset the tax losses against the profits of the next nine years
The offsetting of tax losses can be fiscally beneficial for you. So a refund of tax paid in the past can be requested. You also have the ability to reduce the profit in a year with a loss from the previous year, so that less tax is paid than would be the case without the loss offset.
What can you do?
Depending on the facts and circumstances, you can take the following actions to prevent loss evaporation:
- Realise tacit reserves on assets through sale to a related company
- Materially pass on costs
- Reduce tax provisions or change the tax valuation
- Capitalise costs
- Contribute profitable activities
- Extend the financial year
Ifs and buts
Loss relief is restricted in time, so that losses are perishable and potentially 'evaporate'. To counteract this so-called loss evaporation, it is important to monitor the offset losses and where possible to take action if loss evaporation occurs.
In addition, a time limit restriction of loss relief applies where the ultimate interest in a taxable entity has changed by 30% or more. As of the date of such change, losses in the preceding period are, in principle, not deductible in advance. However, there are some exceptions to this. The act also still provides in these situations for the possibility of revaluation of assets by losses (in part).
There is also a special regime of losses for holding and finance companies. This regime means, in essence, that losses of holding and finance companies can only be offset against profits gained by holding and financing companies.
Would you like to learn more?
Would you like to know what options you have to use loss offset? Then talk to Eric Klein Hesseling (partner) by e-mail: email@example.com or by phone: +31 88 277 23 84. He will be happy to assist you further.