Companies should be able to reduce their cash flow by carrying over their deficit

The next amending budget of 15 billion euros which will be presented next Wednesday should list the aid granted to support businesses and assist them in coming out of the crisis.

Among the planned devices, according to the Echoes, the government responded favorably to the employers’ wish, which had asked to strengthen the fiscal mechanism for carrying back deficits (or “carry-back”). This tool allows a company, which has incurred a fiscal deficit for a year, to recover in the form of a debt part of the corporation tax paid the previous year, when the company had released benefits. Enough to alleviate the cash flows heavily impacted by the crisis and avoid a wave of closures.

Concretely, in 2020, a company posts losses of 750,000 euros whereas it had been profitable in 2019 of 500,000 euros. Thanks to this tax system, it has the possibility of imputing part of its losses on the fiscal year of 2019 and thus recovering part of the tax that it had paid on its profit. As the European Commission has authorized companies to charge the deficit over the three previous years, the 250,000 euros of losses can carry over to previous years.

“This is a strong measure, which supports companies weakened by the Covid crisis which were previously in good health,” explains a specialist in corporate taxation in Les Échos. Still, this measure at an estimated cost of between 500 to 600 million euros in revenue less per year in the state coffers.

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