Federal bill to extend the deadline for tax loss compensation

As a reminder, under current Swiss tax law, companies (including the self-employed taxpayer) can offset their losses against profit during the next 7 fiscal years. The restriction to 7 years for loss compensation creates disparities by penalising companies that have suffered significant one-off losses followed by modest profits, as well as those recording recurring losses over several years with low profits.

Since then, a motion has made its way through the Swiss Parliament to increase the loss compensation period from 7 to 10 fiscal years. As the consultation procedure ended in 2023, the results of the consultation and the amendments to the draft federal law should be published and submitted by the Federal Council in the coming months. This project would allow this extension of loss compensation to be introduced only from 1st January 2028. Indeed, the motion aims to support companies hard hit by the COVID-19 pandemic. The introduction on 1st January 2028 would allow companies that have not yet been able to offset their tax losses from 2020 to do so for 3 additional tax periods. Internationally, the proposed changes would be compatible with Switzerland's international obligations and could even bring the Swiss tax base closer to that of the OECD and the G20.

Extending the deadline for compensating losses to 10 years will result in a reduction in annual revenues for the Confederation and the cantons, although the exact amount cannot be quantified due to the lack of statistical data on loss carried forward. Several proposals to extend such a deadline for offsetting tax losses have always been rejected in the past. The Federal Council was opposed to this motion because of the low chances of success of such project, but also because of the numerous proposals underway concerning taxation and potential tax relief.

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