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. The draft law responded to a motion submitted by Parliament, motivated by the particularly difficult economic situation many businesses face in the aftermath of the COVID-19 pandemic. While the Federal Council acknowledged the motion’s relevance in principle, it does not consider the proposed measure a priority. Given the state of federal finances and the relatively modest benefits of the proposal, it refrains from recommending its approval.

Other European countries, including Switzerland’s neighbors, allow for unlimited loss compensation over time. However, they often cap the compensation amount, ensuring a minimum tax on realised profits. Similarly, the OECD and G20 minimum taxation provisions include unlimited loss compensation over time. The parties and organisations consulted were largely in favor of the draft, while most cantons opposed it, highlighting that the current law already includes effective fiscal measures to support viable businesses undergoing restructuring.

The Federal Council is, in principle, supportive of the motion’s intent. However, the proposed measure would result in reduced tax revenues at all levels of government, a decrease that cannot be precisely quantified due to insufficient statistical data.

Over the coming years, the Confederation will face significant challenges in addressing projected structural budget deficits. To this end, in September 2024, the Federal Council decided to focus primarily on expenditure reductions. It believes it is essential to prioritise projects that would lead to new tax losses or expenditures and, if implemented, to plan financing measures accordingly.

For these reasons, the Federal Council refrains from proposing the project’s approval to Parliament. The topic of loss compensation and its effects on Switzerland’s economic appeal will also be addressed in a report responding to Postulate 23.3752, “Preserve Attractiveness, Ensure Finances: Switzerland Needs a Long-Term Tax and Economic Promotion Strategy.”

Earlier, The Switzerland Federal Council announced that there is an ongoing parliamentary consideration of a proposal to extend the period for carrying forward losses from seven years to 10 years. The primary objective of this proposal is to provide support for companies that have been impacted by the COVID-19 pandemic, by allowing them more time to resume their business activities. This potential change would apply to all companies, including those with permanent establishments abroad that have recognised losses in Switzerland, as well as self-employed individuals.