Switzerland has extended the loss carryforward period following the expiry of the referendum period for the implementing Federal Law on 17 April 2026. The reform allows longer deduction of business losses and introduces revised rules for foreign permanent establishments and transitional cases.
Switzerland is introducing an extension to the loss carryforward period following the expiry of the referendum period for the implementing Federal Law on 17 April 2026.
The Swiss Federal Law on Extending Loss Compensation Periods, adopted on 19 December 2025, primarily extends the timeframe for deducting business losses from taxable income. The law was officially published in the Federal Gazette on 7 January 2026.
The legislation amends both the Federal Direct Tax Law and the Federal Law on the Harmonization of Direct Taxes of Cantons and Communes. The most significant change is the extension of the loss carryforward period to ten years. Losses incurred during the ten business years preceding the current tax period may now be deducted from taxable income or net profit. This applies to both self-employed individuals under income tax and legal entities under corporate profit tax.
In relation to foreign permanent establishments, the law introduces a specific adjustment mechanism. Where a Swiss company offsets losses from a foreign branch, and that branch subsequently records a profit within the following ten years, the original Swiss tax assessment will be revised or the tax will be recovered to reflect the earlier loss offset.
The law also includes transitional provisions. The previous rules will continue to apply to losses incurred before the 2020 tax period. This applies to losses from independent lucrative activities, foreign establishments, and legal entities.
Earlier, the Swiss Federal Council announced the adoption of a dispatch proposing legislation to extend the loss carry forward period from seven years to 10 years on 27 November 2024.
