Deduction of loss from tax

Time-Extended Loss Use – that’s what you call it when you lose money somewhere and somehow and you can creatively use tax law forms to at least offset the losses

Of course, the legislature doesn’t really like this and has tried to limit these options since the publication of the 2019 Annual Tax Code at the latest. It can be understood from the point of view of the tax authorities, because profiting from losses is extremely useless for the state and nothing more than subsidizing things that did not work, that is, throwing good money after bad.

In “JStG 2020”, the regulation on the expanded use of losses (section 20, paragraph 6, clauses 5 and 6 EstG) has been somewhat expanded in favor of taxpayers, but there are still significant obstacles, only the annual amount of loss compensation has been increased from 10,000 euros collected and €20,000 and Section 32b(2) No. 1(b) of the Income Tax Act has been slightly modified.

The rule applied today is based primarily on Section 20 of the Income Tax Code of the Corporate Tax Reform Act of 2008 (Federal Law Gazette I 2007 p. 1912), which was introduced primarily through withholding tax on income from capital assets. It was said here to be reasonably fair: those who remit capital gains must also be able to claim capital losses for tax purposes in return. In fact, this was often not fair, because many tax departments did not, for example, recognize the failure of a debtor’s bankruptcy claim as a loss as much as the unfortunate sale of something or the development of a business.

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“JStG 2019″ essentially limited the use of losses over a period of time, but left many unanswered questions that ended up in the most varied variations before German tax courts. Doctor. Sebastian Kurz, attorney specializing in tax law and tax defense attorneys: “This means that a client’s question about whether something should be done remains unanswered at the moment. There is certainly something that needs to be done, but this requires a complex strategy that should be left to the experts. Experienced!”

What is it specifically about? Losses on forward transactions can be deducted up to a maximum of €20,000 per year. The rest of the legal text is no longer presented in a layman’s way. However, there is still the option to write off even millions of losses over a period of up to 50 years for tax purposes.

Doctor. Sebastian Kurz is available as an attorney specializing in tax law and tax defense attorney to solve tax law problems – throughout Germany.

More topics on tax law: www.steuerrecht.com

Frank Mccarthy

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