Examples of Offsetting of tax losses
Offsetting tax losses is a very serious matter because it allows us to lower our tax bill and save money in a legal way.
If your company is newly created or a ‘start-up’ and you can enjoy for a few years the reduced rate of 15% in your IS, choose well the moment in which you compensate your negative bases.
This way you will reduce your taxation to the maximum…
Reduced corporate tax rate of 15%.Reduced corporate tax rate of 15%.
Start up’ or newly created company
There are currently some companies that can benefit for a few years from the reduced rate of 15% in Corporate Income Tax (IS), instead of paying the general rate:
- New creation . New or recently created companies can benefit from the 15% rate in the first year in which their taxable base is positive and in the following year .
- Start-ups . Emerging companies (so-called ‘start ups’) can do so in the first year with a positive base and in the following three .
Consecutive years
In both cases the reduced rate is only applicable in the first year with a positive tax base and in the following year (or in the following three consecutive years in the case of ‘start ups’).
Attention! Don’t get confused: even if the company incurs a loss in one of these periods, this does not allow it to extend this period by a further year.
For example, if in 2023 a newly created company obtains a positive base for the first time and applies the 15% rate, although in 2024 its base is negative, in 2025 it will have to pay tax at 25% (or 23% if it is a micro-SME).
OFFSET TAX LOSSES WHEN IT IS MOST CONVENIENT TO DO SO
Initial tax losses
Compensation
If your company is newly created or a ‘start up’, it is very likely that at the beginning you will accumulate tax losses (BIN).
For this purpose, remember that:
- Offsetting BIN is optional . Your company can decide whether or not it wants to offset BIN pending from previous years and in what amount it wishes to do so.
- There is currently no maximum number of years for offsetting outstanding BINs. Except in exceptional cases, BINs are not lost.
Optimal offsetting
With this in mind, when your company starts to make a profit, offset your outstanding BINs in an optimal way.
This will reduce your taxation as much as possible. In this respect, make sure that in tax years where the applicable rate is 15%, the taxable income is as high as possible.
To this end, if necessary, delay the offsetting of your outstanding BINs (so that your company achieves this target).
Offsetting of tax losses : examples
Results
Your company is a start-up incorporated in 2023. The taxable income generated in each year is as follows (in thousands of euros):
| Concept | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |
| Tax Base | -200 | 50 | 300 | 400 | 450 | 500 | 500 |
Optimal option
In this case, the best alternative is to offset 50,000 euros of BIN in 2024 to leave the tax base for that year at zero and in 2029 to offset the remaining BIN.
Thus, the tax base taxed at the rate of 15% is the maximum possible (option 1).
On the other hand, if the BIN of 2023 are offset in full in the IS of 2024 and 2025 (option 2), the amount taxed at 15% is lower and the tax payable is EUR 19,500 higher:
| Concept | Option 1 | Option 2 |
| 15% tax Base | 1.650.000 (1) | 1.500.000 (2) |
| 25% tax base | 350.000 (1) | 500.000 (2) |
| Total cuota | 330.500 | 350.000 |
The tax bases for 2025, 2026, 2027 and 2028 are taxed at 15% in full.
In 2029, the EUR 150,000 BIN is offset (EUR 50,000 is offset in 2024).
Thus, the taxable income taxed in 2029 at 25% is only 350,000 euros.
In 2025, EUR 150,000 of BIN is offset. In 2029, the tax base is taxed in full (no BIN to be offset).
Choose the right moment to offset your company’s BINs.
Make sure that, in years where the applicable rate is 15%, the taxable income is as high as possible.
In this way, a lower taxable base will be taxed at the general IS rate.
