The ten-year tax loss carry forward period:

A closer look at Switzerland’s proposal

Switzerland is moving to modernize its tax framework, potentially. The Federal Council published its draft law and the corresponding dispatch on extending the tax loss carry forward period from seven to ten years at its meeting on 27 November 2024 . This change would allow businesses more time to offset prior losses against future profits, aligning better with the realities of long business cycles.

For investors, this is highly relevant as it impacts corporate financial stability, deferred tax asset recognition, and long-term profitability.
This edition of Investor Monday explores the proposed extension, compares Switzerland’s approach with other jurisdictions, and analyzes the broader implications for businesses and investors alike.

The change would be particularly relevant for industries with long investment cycles, such as technology, biotech, pharma, and infrastructure, where profitability often takes years due to significant upfront costs. It also addresses challenges caused by economic disruptions like COVID-19 and highlights the need for measures that reduce the risk of losses expiring unused.

Globally, tax systems vary widely. While some allow indefinite tax loss carry forwards or include carry back mechanisms, these are often paired with minimum taxation requirements to ensure a baseline contribution. While Switzerland does not offer indefinite carry forwards or carry back options, the additional flexibility would make its tax framework more competitive compared to the current seven-year limit.

This proposal would offer businesses and investors new opportunities for:

• Increased flexibility for long-cycle industries: Companies in sectors with delayed profitability can better match losses with future profits, reducing taxable income over an extended period.
• Better alignment with cash flow needs: A longer carry forward period stabilizes income, helping companies manage taxes during volatile cycles.
• 𝐑𝐞𝐜𝐨𝐠𝐧𝐢𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐯𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐃𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐭𝐚𝐱 𝐚𝐬𝐬𝐞𝐭𝐬 by increasing recognition opportunities, reducing write-down risks, and necessitating international alignment for cross-border tax coordination

Discover how this proposal impacts tax planning, deferred tax assets, and long-term strategies in the Newsletter:

Newsletter Tax loss carry forwards.pdf (200.43KB)

Newsletter Tax loss carry forwards.pdf (200.43KB)