GmbH Loss Carryforward in Germany 2026: How to Use Losses to Save Tax

Loss years are a normal part of running a business, even for a GmbH. German tax law recognises this and allows losses to be offset against future or past profits. This mechanism is called Verlustvortrag (loss carryforward), and used correctly, it can significantly reduce your tax bill in profitable years.

In short: Your GmbH's losses are not wasted. They can be carried back to a prior year (up to €1 million, for an immediate refund) or carried forward with no time limit into future years. In profitable years they reduce corporate and trade tax. Above €1 million of profit, however, minimum taxation applies: for 2024–2027 the excess profit can only be offset up to 70%. And if you sell more than 50% of the shares, the carryforward can be forfeited entirely (§8c KStG), unless you secure it with an application under §8d KStG.

What is a Loss Carryforward (Verlustvortrag)?

A loss carryforward arises when your GmbH's taxable expenses exceed its income in a given fiscal year, resulting in a taxable loss. This loss is carried forward into the next year and reduces the taxable profit there. The legal basis is §10d EStG (for corporate income tax, Körperschaftsteuer) and §10a GewStG (for trade tax, Gewerbesteuer).

Example: Your GmbH posts an €80,000 loss in 2024. In 2025 it earns €120,000 profit. With the loss carryforward, the taxable profit drops to €40,000, so you pay tax on €40,000 instead of €120,000. At an effective total burden of roughly 30% (corporate income tax, solidarity surcharge and trade tax combined), that saves around €24,000 in this example.

Two features make the carryforward especially valuable:

• No time limit: a loss carryforward never expires. It stays on the books until it is fully offset against profits, even across many years.
• Assessed in full: the entire loss is officially assessed. Only the annual usage is capped above €1 million by minimum taxation (see below).

Loss Carryforward vs. Carryback: Which Is Better?

Besides carrying losses forward, you can carry them back into the past (Verlustrücktrag, §10d(1) EStG). Since 2022 the carryback reaches two years back; since 2024 the ceiling is again €1 million per year (the €10 million limit that applied during the Covid years has expired). If your GmbH paid profit taxes in one of the two prior years, it gets those back proportionally, an immediate refund that directly improves your cash position.

The carryback is applied automatically by the tax office. But you can waive it in full or in part if the carryforward is more advantageous, for example because you expect significantly higher profits (and higher tax rates) in future years. Rule of thumb: if the prior year was profitable and you need cash now, the carryback is attractive. If you expect strong profit growth, the carryforward tends to be worth more.

Minimum Taxation: The €1 Million Threshold

For high-profit years, Germany's Mindestbesteuerung (minimum taxation) rule applies. It ensures that a portion of profit is always taxed, even if large loss carryforwards remain. The rule:

• Up to €1 million of profit (the base amount) the carryforward is deductible in full.
• Of the profit above that, for the years 2024 to 2027 only 70% can be offset with carryforwards (before and from 2028 again 60%). The remaining 30% is taxed.

This 70% rule was introduced by the Wachstumschancengesetz (Growth Opportunities Act) and applies equally to corporate income tax (§10d EStG) and trade tax (§10a GewStG).

Example: Your GmbH has a €5 million loss carryforward and earns €3 million profit this year. First the €1 million base amount is deducted in full. Of the remaining €2 million profit, 70% (€1.4 million) can be offset. In total you offset €2.4 million, leaving €600,000 taxable, even though €2.6 million of carryforward remains. That balance rolls into future years.

For most small and medium GmbHs with profits below €1 million, minimum taxation is irrelevant in practice: here the carryforward is usable in full.

Corporate Tax vs. Trade Tax: Separate Loss Accounts

A common misconception: there isn't one carryforward but two. Losses are tracked separately for corporate income tax (Körperschaftsteuer) and trade tax (Gewerbesteuer), because each tax has its own base. This can result in different carryforward balances, for example when trade-tax add-backs (such as a share of rents or interest) raise the trade income.

The tax office issues an annual Verlustfeststellungsbescheid (loss determination notice) that officially documents both carryforwards. This notice is worth real money: keep it safe and check it every year for accuracy. Errors in the assessment mean losses can't be fully used in later profit years.

Watch Out for Loss Forfeiture: §8c and §8d KStG

The biggest pitfall specific to a GmbH: on a change of shareholders, the carryforward can be forfeited in whole or in part (§8c KStG). The rule exists to prevent trading in pure "loss shells".

• Up to 50% of the shares transferred to one buyer within a five-year period: harmless; the carryforward stays intact.
• More than 50% of the shares to one buyer (or a group of buyers): the entire unused carryforward is forfeited.

This applies not only to a sale but also to inheritance, contributions or capital increases that shift the ownership ratios. So if you buy a GmbH with carryforwards, don't assume you can automatically use those losses.

The §8d KStG lifeline: on application, forfeiture can be avoided if the business is continued unchanged. The loss then lives on as a continuation-bound loss carryforward (fortführungsgebundener Verlustvortrag). The condition: the company must not shut down or materially change its original business, neither before nor after the share acquisition. The application is made in the tax return of the transfer year. Because §8c/§8d KStG are complex and error-prone, any planned share transfer involving carryforwards belongs on your tax advisor's desk beforehand.

Document Your Losses Properly

For losses to be recognised, your bookkeeping must be complete and compliant:

• GoBD-compliant bookkeeping: all receipts and documents captured correctly; otherwise the tax office cuts the loss.
• Correct annual financial statements: balance sheet and P&L must reflect the actual loss.
• Correct tax return: declare the loss in both the Körperschaftsteuererklärung and Gewerbesteuererklärung.
• Check the Verlustfeststellungsbescheid every year for accuracy and file it permanently.

In loss years the temptation to cut corners on bookkeeping is strong. That's exactly the wrong moment: only a cleanly recorded loss is recognised, and it turns into real money in later profit years.

Strategic Use of Loss Carryforwards

With smart planning you can extract maximum value from your carryforwards:

• Expense timing: if a loss year is anticipated, pull forward planned investments or larger purchases; this grows the carryforward for profitable years ahead.
• Carryback for liquidity: if one of the two prior years was profitable, the carryback delivers an immediate refund instead of waiting on future profits.
• Protect share transfers: before any change of shareholders, check whether §8c KStG applies and whether a §8d application saves the carryforward.
• Tax grouping (Organschaft) in a GmbH holding structure: under certain conditions, a subsidiary's losses can be offset against the parent company's profits.

By the way: self-employed people and freelancers use the loss carryforward too; there it runs through income tax rather than corporate income tax, but the core mechanics are the same.

Frequently Asked Questions

How long is a GmbH's loss carryforward valid?

Indefinitely. An assessed carryforward never expires and stays on the books until fully offset against profits, even across many years. It can, however, be forfeited on a share transfer of more than 50% (§8c KStG).

Do I have to apply for the carryforward at the tax office?

No. The loss is assessed automatically based on your tax return and documented in the Verlustfeststellungsbescheid. Only the carryback gives you a choice: you can waive it in full or in part to carry the loss forward instead.

How much carryforward can I use per year?

Up to €1 million of profit in full. Of the profit above that, for 2024–2027 only 70% can be offset (minimum taxation), then 60% again. The rest of the carryforward remains and rolls into future years.

What happens to the carryforward when I sell the GmbH?

If more than 50% of the shares are transferred, the carryforward is generally forfeited in full (§8c KStG). It can only be saved by applying for a continuation-bound carryforward under §8d KStG in time and continuing the business unchanged.

Does the carryforward apply to trade tax too?

Yes, but separately. Corporate income tax and trade tax keep two independent carryforwards. Trade-tax add-backs can make them differ in size.

Conclusion

Losses in a GmbH are not a disaster, if you use them correctly. Loss carryforward and carryback are powerful GmbH tax optimisation tools. Three things matter: clean, GoBD-compliant bookkeeping that captures the loss correctly; an eye on minimum taxation in profit years; and caution on every change of shareholders because of §8c KStG. With Norman's AI bookkeeping and integrated GmbH tax filing, you stay on top of your loss carryforwards, even across multiple years.