What is Tax Loss Carryforward?
A tax loss carryforward allows a business to apply a net operating loss from one year against taxable profits in future years, reducing tax liability when the business returns to profitability.
How It Works
- Quantify the tax loss for the year.
- Carry it forward subject to local rules and time limits.
- Offset against future taxable income.
Saudi Context
ZATCA allows Saudi corporate taxpayers to carry forward losses indefinitely, but the annual offset is capped at 25% of taxable income each year. Zakat-only entities are not eligible.
Example
A Saudi industrial company posts a SAR 4 million tax loss in 2024. In 2025 it earns SAR 10 million taxable income and offsets up to 25% (SAR 2.5 million), saving SAR 500K tax.