Nineteen out of the 35 European countries analyzed allow businesses to carry forward their NOLs for an unlimited number of years. Of the remaining countries, Luxembourg has the most generous limit, at 17 years, while Bulgaria, Croatia, the Czech Republic, Greece, Hungary, Moldova, Poland, Romania, Slovakia, Slovenia, and Turkey limit their carryforwards to five years. For comparison, the United States allows businesses to carry forward their NOLs for an unlimited number of years, but limits the deductible amount to 80 percent of taxable income.
While all major European countries allow their businesses to carry forward losses, they tend to be much more restrictive with carryback provisions. Of the nine countries that allow carrybacks, only Estonia, Georgia, and Latvia provide them without a time limit. For comparison, the United States does not currently allow businesses to carry back losses.
It is worth noting that Estonia, Georgia, and Latvia do not explicitly allow for indefinite loss carryovers. Both of their corporate tax systems utilize 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, a cash-flow tax effectively allows for indefinite loss carryovers. Cash-flow tax systems also avoid potentially adverse incentives associated with more generous loss carrybacks.
In addition to year limits, several countries impose deductibility limits. For example, in the Netherlands, past or current losses exceeding EUR 1 million can only be deducted up to 50 percent of taxable income of the relevant period. No countries in Europe currently adjust their loss offsets for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spendin or the time value of money, which could improve the neutrality towards losses held over longer time periods.
Recent Changes
A few countries recently made changes to their carryover provisions. Starting in 2026, Cyprus extends its maximum carryforward period from five to seven years. From 2025, Slovenia restricts the period for which businesses can carry forward losses from an unlimited time to five years. France tightened deductibility limits in 2026, prohibiting businesses with aggregate tax losses above EUR 2.5 billion in the fiscal years 2023 to 2025 from carrying forward the exceeding portion into 2026 or the following years.
Starting from 2028, Switzerland will extend the maximum period for loss carryforwards from 7 to 10 years. In contrast, Germany’s more generous deductibility limit for losses exceeding EUR 1 million will tighten again from 70 to 60 percent of taxable income in 2028 unless current provisions are extended.
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