The Federal Council (“Bundesrat”) published its draft law and the accompanying dispatch on the extension of the tax loss carry-forward period from seven to ten years (media release: German/French), but at the same time recommended that the proposal be rejected. What are the chances of this proposal being adopted by the Swiss Parliament?

Legal Background

Under the current tax law (Direct Federal Tax, Cantonal and Municipal Taxes; art. 67 FDTL; German/French), tax losses carried forward can be offset against taxable profits for a maximum of seven years. There is no time limit for restructuring measures. Due to a special provision in the current tax law, Swiss companies with permanent establishments abroad may provisionally offset the losses of the foreign permanent establishment against profits in Switzerland. This provisional offsetting of losses becomes definitive after seven years (Direct Federal Tax, most Cantonal and Municipal Taxes; Art. 52 para. 3 FDTL; German/French).

Draft Law

To help companies affected by the coronavirus pandemic, the Swiss Parliament has instructed the Federal Council to prepare a law to extend the period from seven to ten years. However, this extension shall only apply to losses incurred from the 2020 tax period onwards. Losses incurred before 2020 shall continue to be subject to the existing seven-year period. In the autumn of 2023, the Federal Council held a consultation on a preliminary law, during which the left-wing parties and two-thirds of the cantons opposed the proposal. On 27 November 2024, the Federal Council published the draft law and the accompanying dispatch to fulfil the Parliament's request. At the same time, however, the Federal Council recommends rejecting the draft law. The tax shortfalls cannot be quantified, but in exceptional years the shortfalls of up to CHF 100 million in Direct Federal Tax are conceivable, according to the dispatch. 

Deloitte’s View

The Parliament's instruction to the Federal Council dates from 2021, when the financial situation of the Confederation and the cantons was more favorable. Since then, the situation has changed due to high deficits at the federal level and in some cantons. It is therefore not surprising that two-thirds of the cantons opposed the proposal during the consultation process. It is currently uncertain whether the proposal will still find a majority in the Swiss Parliament. The clear rejection by many cantons could lead many parliamentarians (especially in the Council of States (“Ständerat”), which represents the cantons) to reject the draft law. From a tax systematic perspective, a limitation in time is to be rejected as it contradicts the constitutional principle of taxation based on economic performance. In many EU countries, losses can be offset without restriction, although in some cases the amount per year is limited. The GloBE Model Rules also provide for an unlimited loss offset.

If you would like to discuss more on this topic, please reach out to our key contact below.

Key contact

Thomas Hug - Partner, National Tax Office

Thomas is the leader of Deloitte Switzerland's National Tax Office. He has a proven track record of being at the forefront of international tax developments and analysing their impact from a Swiss tax technical perspective. Thomas has published thought-leading articles and books, and is frequently asked by industry groups, universities and tax and accounting associations to make presentations or lead seminars. He serves as a substitute judge at the Zurich Tax Court of Appeal.

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