(2023)
What if income from services is negative?
Negative income or losses from services can be offset against profits from similar income in the same year. At the same time, it must be clear that you could also achieve a surplus with the other services. Otherwise, the losses from the services will not be recognised, but you do not have to pay tax on the income either.
If the income from services is negative, it can be carried back to the previous year and offset against similar profits made there. You can also carry the losses forward to the following year and offset them against the surpluses then likely to be achieved. By carrying back or forward the losses, you reduce your taxable income in the relevant year.
Restrictions on public life led to losses for many self-employed and business owners in 2020 and 2021. Previously, losses could be carried back to the previous year in the tax assessment, but with limits of 1.000.000 Euro for single persons and 2.000.000 Euro for married couples (loss carryback according to § 10d para. 1 EStG).
For 2020 and 2021, the tax loss carryback was increased to up to 5.000.000 Euro for individuals and 10.000.000 Euro for joint assessment (§ 10d para. 1 sentence 1 EStG, amended by the "Second Corona Tax Assistance Act" of 29.6.2020).
With the "Third Corona Tax Assistance Act" of 17.3.2021, the tax loss carryback for 2020 and 2021 was further increased to 10.000.000 Euro for individuals and 20.000.000 Euro for joint assessment. These limits also apply to the provisional loss carryback for 2020.
From 1.1.2022, the loss carryback will be permanently extended to 2 years. The increased loss deductions of 10.000.000 Euro or 20.000.000 Euro for 2022 and 2023 will remain in place (§ 10d para. 1 EStG, amended by the "Fourth Corona Tax Assistance Act" of 19.6.2022).
This change means that the limits will not revert to the previous level of 1.000.000 Euro for individuals and 2.000.000 Euro for jointly assessed spouses until 2024.
Note: Previously, you could choose between two options for the loss carryback: you could completely avoid the loss carryback and save the loss for the following year or carry back a specific amount. "At the taxpayer's request, the loss carryback is to be waived in whole or in part. The amount of the loss carryback must be specified in the application" (§ 10d para. 1 sentences 5 and 6 EStG).
Since 2022, this option has been restricted: you can now completely avoid the loss carryback in favour of the loss carryforward, but you can no longer carry back a partial amount. "At the taxpayer's request, the loss carryback is to be waived in full" (§ 10d para. 1 sentence 6 EStG-new). This means that the option to limit the amount of the loss carryback on request is no longer available, so that losses no longer deplete the basic allowance.
