In brief
On 18 September 2026, the Swiss Federal Council confirmed that the new legislation extending the Swiss tax loss carryforward period from seven to 10 years will enter into force on 1 January 2028. The extended carryforward period will apply to tax losses arising from the 2020 tax period onwards. This long-awaited reform applies to both direct federal tax and cantonal and communal income taxes and represents one of the most taxpayer-friendly corporate tax developments in recent years.
While the measure was originally conceived to support businesses affected by the COVID-19 crisis, its practical significance extends far beyond pandemic-related losses. In particular, the reform may create valuable planning opportunities for start-ups, scale-ups, life sciences businesses, technology companies, real estate projects, infrastructure investments and other businesses with long development cycles before profitability is achieved.
Businesses should now review their tax loss positions and future profit expectations to determine whether restructuring, transaction timing or tax accounting positions should be revisited in light of the new rules.
Key takeaways
- The Swiss tax loss carryforward period will increase from seven to 10 years effective 1 January 2028.
- The extension applies to both direct federal tax and cantonal/communal taxes.
- The new rules apply to losses arising from the 2020 tax period onwards. Losses incurred before 2020 remain subject to the existing seven-year limitation.
- The 10-year period also applies to the recapture mechanism relating to foreign permanent establishment losses at federal level.
- The reform particularly benefits businesses with long innovation, development, investment or recovery cycles.
- Companies should evaluate whether losses previously expected to expire may now become usable and whether planning measures should be taken before 2028.
What is changing?
Under current Swiss tax law, tax losses may generally be carried forward and offset against future taxable profits for up to seven years. Once this period expires, unused losses are forfeited permanently.
The new legislation extends this period to 10 years, giving taxpayers three additional years to utilize accumulated losses. It applies to corporations and self-employed individuals alike, and consistently at federal, cantonal and communal level.
Only losses from the 2020 tax period onwards benefit from the extended regime; older losses remain subject to the previous seven-year rule.
Why does this matter?
Switzerland's seven-year limitation was internationally uncompetitive compared with many European jurisdictions, which often permit indefinite carryforwards, often combined with subject to annual utilization caps or minimum taxation mechanisms.
The extension to 10 years represents a meaningful improvement and better aligns taxation with the principle that taxpayers should be taxed on their long-term economic performance rather than short-term fluctuations.
Planning opportunities
1. Consider the timing of taxable transactions
The additional three-year period may affect the optimal timing of business disposals, IP transactions, internal restructurings, group financing, dividend planning and exit transactions.
Taxpayers that expected loss forfeiture before realizing taxable gains may now have increased flexibility to defer taxable transactions and maximize loss utilization.
2. Reassess deferred tax assets
Companies reporting under IFRS, US GAAP or Swiss GAAP FER should assess whether the longer utilization period affects the recoverability of deferred tax assets (DTAs) recognized on tax losses.
For businesses approaching profitability, the extended period may increase the likelihood that deferred tax assets satisfy the applicable recognition criteria.
3. Evaluate Pillar Two implications
For multinational groups subject to the OECD Pillar Two rules, the extension may influence the treatment of deferred tax assets and tax attributes under the GloBE framework. Thus, the measure could have implications for Swiss Qualified Domestic Minimum Top-up Tax calculations and Pillar Two modelling more generally.
4. Foreign permanent establishments
A less publicized aspect of the reform concerns foreign permanent establishment losses. Under Swiss federal tax rules, losses incurred by foreign permanent establishments may under certain circumstances be provisionally deducted in Switzerland. The subsequent recapture period during which foreign profits can reverse the Swiss deduction will also be extended from seven to 10 years.
Groups with significant international operations should review whether the reform changes the long-term economics of existing branch structures.
Practical actions for taxpayers
Before the rules enter into force on 1 January 2028, businesses should consider:
- Updating tax forecasts and business plans
- Assessing deferred tax asset positions
- Re-evaluating transaction timing strategies
- Considering implications for group restructurings
- Reviewing foreign branch loss positions
- Analysing potential Pillar Two consequences.
Baker McKenzie comment
The Federal Council's decision provides welcome certainty on one of the most significant corporate tax measures enacted in recent years. The extension from seven to 10 years may appear modest, the practical impact can be considerable, potentially preserving substantial tax attributes, particularly for businesses with long development cycles or delayed profitability.
The reform will be particularly relevant for start-ups and scale-ups, healthcare and life sciences companies with lengthy R&D phases, where commercial success often materializes years after the initial investment, similar technology and software companies, infrastructure and energy projects, real estate development structures, private capital investments with delayed profitability, and businesses affected by cyclical market downturns.
Taxpayers should not wait until 2028 to assess the impact of the new rules. Companies with material loss carryforwards should model future utilization opportunities now and consider whether existing tax, accounting, financing or restructuring strategies can be optimized in light of the extended carryforward period.
Key message
The extension of the Swiss tax loss carryforward period to 10 years is a significant enhancement of Switzerland's corporate tax regime. Businesses with losses from 2020 onwards should proactively review their tax positions, as the reform may unlock planning opportunities, preserve valuable tax attributes and improve the economics of future transactions.