The Deductibility of Tax Loss as of 1st of July 2020


On 1st of July 2020, Act No. 299/2020 Coll., which changes certain tax laws and the Act on the Compensation Bonus in connection with the occurrence of SARS-CoV-2 came into effect. These changes include an amendment of Income Tax Act relating to the extension of deductibility of tax loss from the tax base.

The adopted change introduces the possibility to deduct tax loss retrospectively in 2 taxable periods immediately preceding the period for which the tax return is filed. For these 2 previous periods, it is possible to deduct a tax loss only up to a total amount of CZK 30 million. The possibility of deducting the tax loss in 5 successive taxable periods remains basically unchanged.

In case the taxpayer decides to deduct tax loss retrospectively, he may deduct this loss by submitting an additional tax return. The taxpayer can for the first time retrospectively deduct tax loss assessed for the taxable period ending after 30th of June 2020. For the taxpayers with calendar year it means tax loss assessed for 2020. It will be then possible to deduct from 2019 and 2018 tax base by submitting relevant additional tax return.

In this context, it is also possible to claim so-called "expected" tax loss, i. e. to deduct the loss before its assessment. It will be deducted in own estimated amount. If the final amount will not subsequently equal to the estimated pre-applied amount of the tax loss, the taxpayer will be either obliged (in case of higher expected loss compared to reality) or allowed (in case of lower expected loss compared to reality) to file the additional tax return and correct the loss deduction.

Another novelty is the possibility of waiving the right to claim a tax loss and thus prevent the automatic extension of the deadline for tax assessment. The waiver must be applied by submitting a notification to the tax administrator together with the submission of the tax return itself. The waiver does not apply for the deductions in 2 preceding periods. In case it is possible to deduct the full amount of loss in the preceding two periods, it will surely be interesting for the taxpayer to apply this waiver.