Corporate tax loss carryforward and carryback in France 2026

Quick answer. A loss-making company can carry losses forward, with no time limit, but the annual offset is capped at €1,000,000 plus 50% of the profit above that threshold. It may also elect carryback against the single preceding year only, within €1,000,000 and that year's profit, generating a tax credit that can be offset or refunded.

Loss carry rules are stable in 2026, but often poorly used. A company running two consecutive loss years can lose part of its carry rights if it does not manage its filings. The stake is direct: a well-used loss reduces corporate tax, and a carryback election not made in time is lost for good.

Carryforward (Article 209-I of the tax code) is the default mechanism: a loss in one year can offset profits in later years, with no time limit. The annual offset is, however, capped at €1,000,000 plus 50% of the profit above €1,000,000.

Example: an SME has a €2,000,000 carried-forward loss at the start of 2025, a year in which it makes a €1,500,000 profit. The offset cap is €1,000,000 + (50% × €500,000) = €1,250,000. It offsets €1,250,000; its taxable profit is €250,000, and the remaining loss (€750,000) stays carryforward, with no time limit, to later years.

Note: the carried-forward loss is lost on cessation of activity or a major change of activity, and a change of control can limit its use (Articles 209-I and 209-II of the tax code).

Carryback (Article 220 quinquies of the tax code) is an election to offset a year's loss against the profit of the single preceding year only, within a double limit:

1. the loss carried back cannot exceed €1,000,000;
2. it cannot exceed the prior year's profit.

This offset creates a claim on the Treasury equal to the excess corporate tax previously paid. The share of loss not carried back stays carryforward.

Example: an SME closes 2025 with a €1,500,000 loss and had made a €1,200,000 taxable profit in 2024. It elects carryback: the loss carried back is capped at €1,000,000 (below the 2024 profit). The credit is €1,000,000 × 25% = €250,000, within the tax actually paid for 2024. The remaining loss (€500,000) is carried forward.

The election deadline#

The carryback election must be made within the filing deadline of the loss-year return, using the dedicated form (2039-SD). After that deadline, the election is lost and the loss falls solely under carryforward: the administration accepts no late correction.

The credit is not taxable income. It can be:

1. offset against corporate tax due in the next five years;
2. refunded at the end of that five-year period if not offset;
3. monetised with a credit institution (assignment of the claim).

In practice, when the company returns to profit, offset is often faster than waiting for a refund.

The choice between the two mechanisms is first a cash-flow decision. Carryback makes sense when the prior year generated significant tax: the credit arises immediately and can be monetised to fund the low point of the cycle. Conversely, when the company expects a quick return to profit, carryforward is often enough, with no formality.

Three criteria guide the decision:

1. The tax paid last year: with no prior tax, there is no credit, so no reason to elect.
2. Visibility on the years ahead: a fast return to profit favours carryforward; lasting uncertainty argues for securing a credit.
3. The cash-flow need: the credit, which can be monetised with a bank, provides liquidity where carryforward only affects future tax.

In accounting terms, the carryback credit is recorded as an asset and does not affect taxable income; it is then offset against the instalments and balance of corporate tax in the following years.

1. Close the loss-making year and establish the tax result.
2. Calculate the loss to carry back (at most €1,000,000, within the prior year's profit).
3. Check the tax paid in the prior year.
4. Complete form 2039-SD within the filing deadline of the result return.
5. Keep the evidence of the election in the tax file.

• Trading or operating loss. Both follow the same carry mechanisms; no distinction is made.
• Merger or absorption. The absorbed company can transfer its losses to the absorbing company, subject to continuity and statutory conditions or approval; advice is recommended.
• Tax-consolidated companies. A subsidiary in a tax group cannot elect carryback on its own; carryback is assessed at group level.
• Reduced corporate-tax rate. An SME taxed at the reduced 15% rate on the eligible profit share offsets its losses against that rate: the tax saving is smaller, but the mechanism is identical.

1. Forgetting the carryback election. A return filed without the election forfeits the right, with no possible correction.
2. Mis-qualifying the loss. A loss outside the carry regime generates neither carry nor credit.
3. Misreading the cap. A company with €2,500,000 of carried-forward losses and €800,000 of profit offsets only €800,000 (profit below the cap), brings its taxable result to zero, and keeps €1,700,000 of carried-forward loss. The common error is to think the loss is "lost" if not fully used: it stays carryforward with no time limit.
4. Ignoring a change of control. An undeclared takeover can put carried-forward losses at risk.

At Hayot Expertise, we regularly support SMEs and startups through alternating profit-and-loss cycles: a loss year, then a return to profit. A director's first reflex facing a loss is to think it is lost — it is not. The second trap is forgetting carryback, which could have generated a refundable credit.

We recommend quarterly monitoring as soon as a year trends toward a loss: forecast the result, estimate the loss, assess the value of carryback (especially if a prior year generated a large tax bill), and decide before year-end.

Hayot Expertise advice. If your year is trending toward a loss, hold a decision meeting before year-end to choose between carryforward and carryback. Carryback is irrevocable once declared, and its omission is final. A company profitable in prior years can convert part of its loss into a corporate-tax credit — provided it elects in time.