Negative income (loss) is offset against positive income over:
- For income from work and home (box 1): the three previous years (and the 9 following years);
- For income from substantial interest (box 2): the previous calendar year (and the 6 following calendar years).
Savings and investment income (Box 3) can never be negative, so loss relief is not an issue in this box.
Long-term
Losses are not set off until the assessment for the loss year is irrevocable. This means that the final assessment must have been imposed by the Tax Administration and the objection period must have expired unused. Because the tax authorities are given as much as 3 years by the legislator to impose a final assessment and this period is also extended by the extension granted for filing the tax return, it can take a long time for a taxpayer to get back the tax he or she is entitled to under loss relief.
Provisional loss relief
That is why there is the possibility of provisional loss relief. This is available for both box 1 and box 2 losses (corporate tax also has the possibility of provisional loss relief). As soon as the income tax return is filed, the filer can ask the Tax Authorities, with a note, to provisionally offset the loss recognised in that return. The tax authorities will then take into account 80% of the loss recognised in the return. The refund from the provisional loss offset will, of course, be offset against the final loss offset.
Final assessment settlement year
The Inland Revenue recently issued a position of a knowledge group which shows that a request for provisional loss relief is not settled until the assessment of the calendar year with which the loss is to be offset is final. This assessment does not have to be irrevocable (i.e. it may still be subject to an objection). This position means that it may still take quite some time before tax to which a taxpayer is entitled on the basis of loss relief is actually refunded.