Verlustrücktrag

Verlustrücktrag is a provision in German tax law that allows a current-year tax loss to be offset against the profits of the previous year. The mechanism is designed to provide immediate tax relief after a loss year by reducing the tax burden that was already assessed for the prior year. It is distinct from loss carryforward (Verlustvortrag), which offsets future profits rather than past ones.

How it works: If a taxpayer incurs a loss in a given year, that loss may be applied to the tax year before, to lower that year's taxable income and the corresponding tax liability. The adjustment is typically made by submitting an amended tax return or via an official correction of the prior-year assessment. The possibility and extent of a Verlustrücktrag depend on the specific tax type (for example income tax, corporate tax, or trade tax) and current law, and there may be caps or conditions attached to the carryback.

Scope and limits: Verlustrücktrag is subject to statutory limits, which can vary by tax category and year. In general, it is limited to offsetting against the immediately preceding year’s profits, and the amount that can be carried back is restricted by the tax liability in that prior year. Temporary regulatory changes can expand or modify the available carryback window or amounts, for instance in response to economic crises, but such extensions are time-bound and require formal legislative action.

Practical notes: To use Verlustrücktrag, taxpayers usually file or amend the relevant tax return within the applicable deadlines. The effect is a tax refund or a reduction in the prior year’s tax payment rather than a deduction from the current year’s income.

See also: Verlustvortrag, Verlustausgleich, EStG.