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Carrying losses forward: the 80% cap, the first three years and unincorporated businesses
The module’s worked examples, then cases to attempt before revealing their solution · 8 sections · 695 words · 8 min
Worked example
From accounting loss to tax loss
An SRL closes its 2025 accounts with a loss of 40,000 euros. The recorded costs include 10,000 euros of expenses unrelated to the business, which the return adds back. The tax loss to carry forward is not 40,000 euros but 40,000 − 10,000 = 30,000 euros: the difference will never reduce any future income.
Worked example
Chiara's company in 2026
Taxable income for 2026: 60,000 euros. Cap on use: 60,000 × 80% = 48,000 euros. The 100,000-euro loss covers 48,000 of it; 12,000 euros remain taxable, giving IRES of 12,000 × 24% = 2,880 euros. On 1 January 2027 the loss still available is 100,000 − 48,000 = 52,000 euros.
Worked example
A start-up back in profit
An SRL incorporated in 2024 to develop a new service loses 30,000 euros in 2024 and 20,000 euros in 2025. In 2026 it earns 45,000 euros. Losses from its first three years can be used against the whole of income, so it offsets 45,000 euros, brings taxable income to zero and carries the remaining 5,000 euros forward.
Worked example
A loss reduced by exempt income
A company ends the year with a tax loss of 50,000 euros and has received 8,000 euros of exempt income not covered by article 87. The related costs, left non-deductible under article 109, paragraph 5, come to 3,000 euros. The loss drops by 8,000 − 3,000 = 5,000 euros, so 45,000 euros can be carried forward.
Worked example
Paolo's business and his salary
Paolo runs a sole-trader business that loses 20,000 euros in 2025; it is not a new activity. In 2026 the business earns 15,000 euros, and Paolo also receives 30,000 euros of employment income. The loss can offset at most 15,000 × 80% = 12,000 euros of business income; the salary stays untouched, and 8,000 euros are carried forward.
Worked example
An SNC with two partners
An SNC with two equal partners ends 2025 with a tax loss of 30,000 euros, so each partner receives 15,000 euros of loss. In 2026 the first partner has 10,000 euros of business income and offsets 8,000 of it; the second has no income of that kind and carries all 15,000 euros forward.
Practical case
Two years of recovery for Chiara's company
Chiara's SRL, incorporated in 2012, starts 2026 with a loss of 100,000 euros available to carry forward, all of it arising in 2025. Taxable income before losses is 60,000 euros in 2026 and 80,000 euros in 2027. How much IRES does the company pay in each year at the standard rate, and what loss is left at the start of 2028?
Hint: Each year, apply the 80% cap to that year's income, compare it with the loss still available and use the lower of the two.
Show the solution
2026: cap 60,000 × 80% = 48,000 euros, below the loss; taxable income 12,000 euros, IRES 2,880 euros; remaining loss 52,000 euros. 2027: cap 80,000 × 80% = 64,000 euros, above the remaining loss; 52,000 euros are used, taxable income 28,000 euros, IRES 28,000 × 24% = 6,720 euros. No loss is left at the start of 2028.
Answer: 2,880 euros in 2026, 6,720 euros in 2027, no loss left
Practical case
A loss in a limited partnership
An SAS with partnership capital of 10,000 euros ends 2025 with a tax loss of 25,000 euros. The general partner is entitled to 60% of profits and the limited partner to 40%. In 2026 the general partner has other business income of 20,000 euros. How is the loss split between the partners, and how much can the general partner offset in 2026?
Hint: Separate the part of the loss within the capital, shared according to profit shares, from the part above it; then apply the 80% cap to the general partner's income of the same kind.
Show the solution
Up to the capital, 10,000 euros are split by shares: 6,000 to the general partner and 4,000 to the limited partner. The 15,000-euro excess goes to the general partner alone, who receives 21,000 euros in total. In 2026 the general partner can offset at most 20,000 × 80% = 16,000 euros; the other 5,000 euros are carried forward.
Answer: 21,000 euros to the general partner, 4,000 to the limited partner; 16,000 euros offset in 2026
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