On 28 October 2026, the NTBT released guidance on the application of loss carryforwards for profit-seeking enterprises under Article 23 of the Income Tax Act. The clarification stipulates that when a company applies approved losses from the preceding 10 years to offset current taxable income, any tax-exempt or tax-free income recognized in the current year must first be used to reduce the loss carryforward balance before calculating taxable income. This rule prevents double tax benefits where companies simultaneously enjoy tax-exempt income and full loss deductions.
Key Takeaways
- Offset Priority: Tax-exempt income (e.g., offshore fund dividends, certain government subsidies) reduces available loss carryforwards before taxable income is computed.
- 10-Year Limitation: Losses may only be carried forward for 10 years following the loss year, per Article 23 Paragraph 4.
- Compliance Impact: Companies with mixed income streams must adjust tax planning models to reflect reduced loss utilization when tax-exempt income is present.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement