The Federal Council has decided that the extended loss carryforward period will enter into force on 1 January 2028. For direct taxes, companies will then be able to offset losses against taxable profits for up to ten years. The current period is seven years.

The new rule applies to loss carryforwards from the tax period 2020 onward. This is particularly relevant for companies that experienced significant losses during the years affected by the Covid-19 economic disruption and have not yet been able to offset them fully against profits.

What changes for Swiss companies?

Under the current rules, companies must generally use tax losses within seven years. From 2028, the period will be extended to ten years. This gives companies more time to use losses when profits return gradually or fluctuate from year to year.

The change concerns direct taxes at federal and cantonal level. The practical benefit will depend on the company’s future taxable profits and the applicable cantonal rules.

Companies should maintain a clear record of the amount of each tax loss, the relevant tax period, losses already offset, remaining loss carryforwards, and the expected expiry date under the applicable rules.

Foreign permanent establishment losses

Swiss companies may deduct losses of foreign permanent establishments from taxable profits for direct federal tax purposes if the loss has not already been recognised abroad. This deduction remains provisional — if later foreign profits offset that loss abroad, Switzerland may reverse the deduction. The monitoring period will also increase from seven to ten years.

What should SMEs do now?

A practical review should include reconciliations with prior assessments, separate tracking of losses from 2020 onward, expected profitability from 2028, foreign PE losses where applicable, and coordination between accounting, tax returns and group reporting.