Can I offset losses from the previous year in the annual financial statements?
August 18, 2022 | 40,00 EUR | answered by Fanni Ehrig
Dear tax consultant,
my name is Hanna Evers and I run a small business. In recent years, I have unfortunately incurred losses, which are also reflected in my annual financial statements. Now I am wondering if I can offset these losses from the previous year in the current year's financial statements to reduce my tax burden.
The situation is that my business has not been as successful in recent years as I had hoped, and I have had to record losses as a result. These losses have affected my equity, and I am concerned that my tax burden could be unnecessarily high as a result. I am wondering if it is possible to claim these losses from the previous year for tax purposes and thus reduce my financial burden.
So my question is: Can I offset losses from the previous year in the current year's financial statements and thereby reduce my tax burden? Are there specific requirements or regulations that I need to be aware of in order to utilize these loss carryforwards? I would greatly appreciate your expert advice on this matter and am eager to explore possible solutions to improve my financial situation.
Thank you in advance for your assistance.
Sincerely,
Hanna Evers
Dear Mrs. Evers,
Thank you for your inquiry regarding the offsetting of losses from the previous year in the current annual financial statements. It is understandable that you are thinking about how to reduce your tax burden, especially if your company has been experiencing losses in recent years.
In principle, it is possible to offset carryforwards from the previous year in the current annual financial statements to reduce your tax burden. This is called tax loss offsetting. By using carryforwards, you can offset your profits from the current fiscal year with the losses from the previous year and thus reduce your tax burden.
However, there are certain requirements and regulations that you must adhere to in order to use these carryforwards. Firstly, the losses must have been properly recorded and claimed for tax purposes in the previous year. It is also important that you have submitted your tax returns correctly and on time.
Furthermore, there are legal regulations regarding the offsetting of carryforwards that must be followed. In Germany, the offsetting of carryforwards is regulated in the Income Tax Act (EStG). This includes, among other things, the maximum limits for offsetting losses.
To ensure that you can use the carryforwards properly and comply with all legal requirements, I recommend seeking advice from an experienced tax consultant. A professional tax consultant can help you optimize the use of carryforwards and effectively reduce your tax burden.
I hope this information is helpful to you and I am available for any further questions. Thank you for your trust and I wish you success in optimizing your financial situation.
Sincerely,
Fanni Ehrig
