The Ministry of Finance has proposed an amendment to the income tax law, to introduce an option to allow taxpayers to use tax losses retroactively for up to two years, or prospectively for up to six years, as a tax relief measure in response to the coronavirus (COVID-19) pandemic.
Loss carrybacks, carryforwards
Under the proposal, taxpayers would have the option to carry back and claim a tax loss (or a part of a tax loss) against their individual (personal) and corporate income tax base for the prior two taxable periods or to carry forward and claim the loss in the following six years from the year of the loss.
For instance, calendar-year taxpayers would be allowed to carry back and claim their tax loss for 2020 in the taxable periods that began on or after 1 January 2018. If calendar year 2020 is used as the taxable period, the six-year period in which to carry forward and claim the loss for 2020 would end 31 December 2026 (meaning that the tax loss could be at the very least be carried forward and claimed in the tax period for the year 2026).
To carry back the loss, an additional tax return would have to be filed for the relevant years, together with an application for a refund of any overpayment.
The proposal would not allow for loss carrybacks related to business transformations or transfers of a business establishment. According to an explanatory report, however, it may be that a regulation allowing for a tax loss carryback realized on business transformations could possibly be adopted in the future.
For investment incentive recipients, there would be a special rule for the treatment of a loss carryback. Taxpayers claiming tax relief under such incentives would have to meet certain special conditions.
The final wording of the legislation may be amended as the bill proceeds through the legislative process.
Read an April 2020 report prepared by the KPMG member firm in the Czech Republic
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