A step in the right direction

On December 19, the Swiss parliament adopted a significant change to the tax loss compensation system: the loss carry-forward period has been extended from 7 to 10 years.
This reform applies to direct federal tax as well as to cantonal and municipal taxes, thus ensuring consistent tax treatment at all levels.

Scope of application

The new carry-forward period applies to losses incurred from the 2020 tax period onwards, which includes the years affected by the COVID-19 crisis.
Past losses remain subject to the current seven-year limit.

Next procedural step

The law must still be published in the Federal Gazette, which will open the 100-day optional referendum period.
Subject to the absence of a successful referendum, entry into force is envisaged for January 1, 2028, the date still needs to be formally set by the Federal Council.

Our analysis

Extending the deferral period is a pragmatic and welcome development, particularly for companies facing long economic cycles or gradual recovery phases. It improves tax predictability and enhances medium- and long-term planning capacity.

It should also be noted that several European countries already allow losses to be carried forward without any time limit. In this comparative perspective, the move from 7 to 10 years represents a clear step in the right direction, even if the Swiss system remains relatively conservative.

Finally, Swiss tax law still does not provide for a carry-back mechanism (offsetting losses against profits from the previous financial years), as the system is based exclusively on carry-forward of losses to future profits.