Net Operating Loss Carryforward and Carryback Provisions in Europe

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Loss carryover provisions allow businesses to either deduct current year losses against future profits (carryforwards) or deduct current year losses against past profits (carrybacks). Many companies have investment projects with different risk profiles and operate in industries that fluctuate greatly with the business cycle. Carryover provisions help businesses “smooth” their risk and income, making the tax code more neutral across investments and over time.

Ideally, a tax code allows businesses to carry over their losses for an unlimited number of years, ensuring that a business is taxed on its average profitability over time. While some countries do allow for indefinite loss carryovers, others have time limits. The following two maps look at this time restriction on loss carryovers, showing the number of years a business is allowed to carry forward and to carry back net operating losses.

Net Operating Loss Carryforward, Net Operating Loss Carryback, Net Operating Loss Tax Provisions, Loss Carryover tax provisions

Fifteen out of the 27 European OECD countries allow businesses to carry forward their net operating losses for an unlimited number of years. Of the remaining countries, Slovakia has the tightest limit, at four years, and Luxembourg the most generous limit, at 17 years.

While all European OECD countries allow their businesses to carry forward losses, they tend to be much more restrictive with carryback provisions. Of the seven countries that allow carrybacks, only Estonia and Latvia provide them without a time limit.

It is worth noting that Estonia and Latvia do not explicitly allow for indefinite loss carryovers. Both their corporate tax systems are a so-called cash-flow tax. This tax is only levied when a business distributes its profits to its shareholders, making calculating the annual taxable profits—including potential loss deductions—redundant. Compared to a traditional corporate tax system, such a cash-flow tax effectively allows for indefinite loss carryovers.

In addition to year limits, several countries impose deductibility limits. For example, Italy’s loss deduction can only be applied to 80 percent of taxable income.

Net Operating Loss Carryover Provisions in European OECD Countries, 2019

Sources: EY, “Worldwide Corporate Tax Guide 2019,” 2019,$FILE/ey-worldwide-corporate-tax-guide-2019.pdf; and PwC, “Worldwide Tax Summaries,” 2019-2020,

CountryLoss Carryforward (Number of Years)Loss Carryback (Number of Years)Limit to Deductibility
Austria (AT)Unlimited0Carryforward capped at 75% of taxable income.
Belgium (BE)Unlimited0Carryforward capped at 70% of the taxable amount exceeding EUR 1 million (US $1.1 million).
Czech Republic (CZ)50
Denmark (DK)Unlimited0Carryforward capped at 60% of the taxable amount exceeding DKK 8,572,500 (US $1.25 million) for 2020.
Estonia (EE)UnlimitedUnlimited
Finland (FI)100
France (FR)Unlimited1Carryforward capped at EUR 1 million plus 50% of taxable amount exceeding this limit. Carryback limited to EUR 1 million.
Germany (DE)Unlimited1Carryforward capped at EUR 1 million plus 60% of taxable amount exceeding this limit. Carryback limited to EUR 1 million.
Greece (GR)50
Hungary (HU)50Carryforward capped at 50% of taxable income.
Iceland (IS)100
Ireland (IE)Unlimited1
Italy (IT)Unlimited0Carryforward capped at 80% of taxable income.
Latvia (LV)UnlimitedUnlimited
Lithuania (LT)Unlimited0Carryforward capped at 70% of taxable income.
Luxembourg (LU)170
Netherlands (NL)61
Norway (NO)Unlimited0
Poland (PL)50Carryforward capped at 50% of total loss per year.
Portugal (PT)50Carryforward capped at 70% of taxable income.
Slovak Republic (SK)40Carryforward capped at 25% of total loss per year.
Slovenia (SI)Unlimited0Carryforward capped at 50% of taxable income.
Spain (ES)Unlimited0
Sweden (SE)Unlimited0No direct carryback provision but tax allocation reserve may be viewed as a type of carryback.
Switzerland (CH)70
Turkey (TR)50
United Kingdom (GB)Unlimited1Carryforward capped at GBP 5 million (US $6.5 million) plus 50% of taxable income.

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