In order to offset the negative impact of the COVID-19 pandemic, the government is planning to include loss carryforward relief. Previously, the government introduced loss carryback relief for companies with common capital of up to JPY1 billion (US$10 million) that are not directly or indirectly wholly owned by companies with common capital exceeding JPY1 billion. The carryback period is one year and applies to NOLs incurred in fiscal years ending between 1 February 2020 and 31 January 2022.
Under the loss carryforward relief plans, entities will be allowed to carry forward net operating losses and offset up to 100% of taxable income for up to five years rather than the usual 50% offset limit. Where outstanding losses remain, the standard 50% offset limit would apply for the following five years. The current rules provide that losses may be carried forward for up to 10 years, subject to a 50% of taxable income offset limit per year.
