Global Comparison of Net Operating Loss Provisions

operating loss carryforward europe map compared

Net operating loss (NOL) provisions are critical considerations for startups and SMEs planning their global expansion. These rules can significantly impact cash flow and tax efficiency, especially during early growth phases when losses are common. Let’s examine how 24 leading startup destinations handle NOL provisions.

Global NOL Provisions Comparison

CountryCarryforward PeriodCarryforward LimitationsCarryback Period
AustraliaUnlimitedNone0 years
Canada20 yearsNone3 years
Czech Republic5 yearsNone2 years
DenmarkUnlimited60% above DKK 9.45M0 years
EstoniaUnlimited*None*Unlimited*
Finland10 yearsNone0 years
FranceUnlimited50% above €1M1 year
GermanyUnlimited70% above €1M2 years
IrelandUnlimitedNone1 year
Japan10 years50% of taxable income1 year
LithuaniaUnlimited70% of taxable income0 years
NetherlandsUnlimited50% above €1M1 year
New ZealandUnlimitedNone0 years
NorwayUnlimitedNone0 years
Poland5 years50% per year0 years
PortugalUnlimited65% of taxable income0 years
SingaporeUnlimitedNone1 year
South Korea15 years80% for large corps1 year
SwedenUnlimitedNone0 years
Switzerland7 yearsNone0 years
UAE0 years**None**0 years**
UKUnlimited50% above £5M1 year
USUnlimited80% of taxable income0 years

*Estonia’s system only taxes distributed profits
**UAE has no federal corporate tax (except on oil companies and foreign banks)

Asia-Pacific Region

Australia

Australia offers an unlimited carryforward period without restrictions, provided companies pass the continuity of ownership test (COT) or business continuity test (BCT). No carryback is allowed, making the system more focused on future growth than immediate relief.

Japan

Japan limits carryforwards to 10 years and allows only 50% of taxable income to be offset by carried-forward losses. A one-year carryback is available but limited to small and medium-sized enterprises (SMEs).

Singapore

Singapore provides a generous system with unlimited carryforward and a one-year carryback option. Companies must satisfy the shareholding test to maintain their carried-forward losses.

South Korea

South Korea allows carryforward for 15 years with an 80% limitation for large corporations. SMEs can use losses without limitation. A one-year carryback is available for SMEs only.

Europe

Denmark

Denmark offers unlimited carryforward but restricts offsets to 60% of taxable income exceeding DKK 9.457 million. No carryback is permitted.

Estonia

Estonia’s unique distributed profit taxation system effectively creates unlimited loss utilization, as profits are only taxed when distributed to shareholders.

Finland

Finland allows 10-year carryforward with no limitations on the amount that can be offset. No carryback provisions exist.

France

France provides unlimited carryforward but limits offsets to 50% of profits exceeding €1 million. A one-year carryback is allowed up to €1 million.

Germany

Germany allows unlimited carryforward with a minimum taxation rule (70% limitation above €1 million) and a two-year carryback period limited to €1 million.

Ireland

Ireland offers one of Europe’s most generous systems with unlimited carryforward without restrictions and a one-year carryback provision.

Lithuania

Lithuania provides unlimited carryforward but restricts offsets to 70% of taxable income. No carryback is allowed.

Netherlands

The Dutch system features unlimited carryforward with a 50% limitation above €1 million and a one-year carryback provision.

Norway

Norway allows unlimited carryforward without restrictions but offers no carryback provisions.

Poland

Poland has relatively restrictive provisions, limiting carryforward to 5 years and 50% of the loss per year, with no carryback allowed.

Portugal

Portugal allows unlimited carryforward but restricts offsets to 65% of taxable income. No carryback is permitted.

Sweden

Sweden provides unlimited carryforward without restrictions but does not allow carryback.

Switzerland

Switzerland limits carryforward to 7 years without amount restrictions and offers no carryback provisions.

Czech Republic

The Czech Republic allows 5-year carryforward without amount limitations and provides a two-year carryback option.

UK

The UK system features unlimited carryforward with a £5 million annual allowance before a 50% restriction applies, plus a one-year carryback provision.

net operating loss carryback map compared europe

North America

Canada

Canada allows 20-year carryforward and a three-year carryback period, making it one of the more generous systems globally.

US

The US provides unlimited carryforward but restricts offsets to 80% of taxable income. The Tax Cuts and Jobs Act eliminated carryback provisions.

Middle East

UAE

The UAE has no federal corporate tax system (except for oil companies and foreign banks), making NOL provisions generally irrelevant except in specific free zones or emirates with local tax systems.

Conclusion

Among these jurisdictions, Estonia’s distributed profit tax system and Singapore’s generous provisions stand out as most favorable for startups. Ireland, Australia, and Norway also offer attractive systems with unlimited carryforward and minimal restrictions. The most restrictive systems are found in Poland and the Czech Republic with their limited carryforward periods.

Asian countries generally offer moderate terms with specific considerations for SMEs, while European provisions vary significantly by country. North American systems tend to be more generous with carryback provisions, particularly in Canada.

For startups, the choice of jurisdiction should consider:

  1. Expected loss patterns
  2. Need for immediate tax relief (carryback)
  3. Long-term growth projections
  4. Local SME-specific provisions
  5. Ownership change restrictions on loss utilization

Further reading:

Tax foundation report 2024

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