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7.1. General Rules

Operating losses can be carried forward for 7 years.

The following losses can be carried forward for 12 years:

  • Related to public infrastructure projects to be built, operated and transferred to the government;
  • In respect of projects relating to construction of power houses and generation and transmission of electricity; or
  • In respect of petroleum exploration and extradition companies.

The carryback of losses is generally not permitted. However, carryback of tax losses for set-off against taxable income of an earlier period is permitted in case of long-term contracts under international competitive bidding, subject to prior approval from the Inland Revenue Department (IRD).

Tax losses cannot be carried forward in income years where full or partial tax exemption has been availed on investment or business income.

Losses arising from the disposal of capital assets or liabilities of a business are allowed as deduction and can be claimed as a normal business expense. However, such losses can be claimed only if the value of the pool of assets (see Sec. 6.3.) becomes zero or negative after being credited against the outstanding balance of the pool.

COVID-19 Emergency Measures

The loss carry-forward limit is increased from 7 years to 10 years for sectors substantially impacted by the COVID-19 pandemic, including hotels, tourism, transportation, and others.