Don’t lose your losses: an update on NOL planning

A report on a session at the IBA’s 26th Annual US and Europe Tax Practice Trends Conference held in Rome on 16 April 2026

Session Co-Chairs

Nita Asher, PwC, Washington, DC
Francesco Capitta, Facchini Rossi Michelutti, Milan

Speakers

Julio Castro, KPMG US, London
Torsten Engers, Flick Gocke Schaumburg, Frankfurt am Main
Reto Heuberger, Homburger, Zurich
Francesco Mantegazza, FIVERS, Milan
Michael Molenaars, Stibbe, Amsterdam
Joel Peters-Fransen, Winthrop & Weinstine, Minneapolis

Reporter

Katharina Schluecke
Linklaters, Duesseldorf
Katharina.schluecke@linklaters.com

Introduction

The panel focused on recent developments and practical planning considerations surrounding the use and preservation of net operating losses (NOLs) in cross-border structures, in particular, from a German, Italian, Dutch, Swiss and United States tax perspective. The Speakers discussed limitations on loss utilisation, ownership changes, group relief regimes and the impact of reorganisations and M&A transactions in key jurisdictions. The discussion also highlighted emerging anti-abuse rules and the interaction of domestic NOL regimes with international tax reforms.

Panel discussion

NOL overview

Starting off, Nita Asher presented an overview of the different loss utilisation concepts in Germany, Italy, the Netherlands, Switzerland and the US, and their significance for cross‑border tax planning and restructuring measures. In particular, she focused on loss carry-forward and carry-back regimes, utilisation caps and the treatment of tax losses in change of ownership scenarios, as well as in merger and reorganisation planning. In her overview, Asher highlighted the key differences and specific features of the loss utilisation rules in each of the jurisdictions represented on the panel.

Impact of OBBBA

After the general overview, Joel Peters-Fransen, Asher and Julio Castro discussed the impact of the One Big Beautiful Bill Act (OBBBA) on loss utilisation and NOL planning in the US. Peters-Fransen began by briefly explaining the legal and political background of the OBBBA. He then provided an overview of the existing loss utilisation regime and the newly introduced OBBBA provisions that may affect tax loss planning for US multinationals. Asher and Castro noted, in particular, that many of the business tax changes enacted by the OBBBA do not contain statutory sunset provisions, unlike a number of the 2017 Tax Cuts and Jobs Act (TCJA) provisions. While these changes remain subject to future legislative amendment or repeal, they are generally expected to remain permanent, absent further congressional action. In this context, Peters-Fransen also highlighted that the Treasury and the Internal Revenue Service (IRS) have withdrawn the proposed regulations under section 382 that would have superseded Notice 2003-65, thereby preserving taxpayers' ability to continue relying on Notice 2003-65 for purposes of determining recognised built-in gains and losses following an ownership change, pending further guidance.

Change in ownership

Torsten Engers started his presentation on the loss utilisation from a German tax perspective in change of ownership constellations with a case study. He first provided a brief overview on the German rules on loss carry-forwards and loss forfeiture and explained the rationale behind these rules. After these general remarks, Engers discussed in detail some case constellations and the effect a change in ownership has on existing loss carry-forwards. In this context, he also highlighted how a special provision in the German loss forfeiture rules can be used as a planning tool in change of ownership scenarios to utilise built‑in capital gains (hidden reserves) and to create step‑up potential for future depreciation. Engers briefly explained the concept and purpose of this rule, in particular the pro rata concept, and shared some practical insights on the valuation and allocation of the realised step‑up.

From an Italian tax perspective, Francesco Mantegazza added that the Italian tax system generally results in a loss forfeiture in change of ownership constellations. However, this does not apply if the vitality test is met or, under certain conditions, in the case of transfer within the same group. Mantegazza further noted that, in any event, the use of loss carry-forwards is, under the current Italian system, limited to the economic or accounting value of the net equity.

Peters-Fransen then continued the discussion with a case study on a change in ownership considerations from a US tax perspective. In this context, he provided an overview and shared some practical insights on the general considerations regarding loss planning in M&A transactions. Peters-Fransen explicitly highlighted the differences to take into consideration when advising the buy side and the sell side, focusing in particular on the ‘value’ of loss carry-forwards. He also addressed how these differing considerations can affect the determination of the purchase price and how to approach these issues. In addition, Peters-Fransen elaborated on the impact of these considerations on the drafting of the representations and warranties in the share purchase agreement (SPA).

In this context, Mantegazza added some practical insights on loss planning in an M&A process from an Italian tax perspective. He focused in particular on the effects that loss carry-forwards can have on the drafting of the representations and warranties for the SPA and how the amount of existing tax losses should be addressed. This led to a discussion on whether representations and warranties should be given to the effect that a loss can be used in the future. The panel agreed that the future use of losses is generally a risk borne by the buyer given that it may also depend on transactions carried out by the latter.

Domestic and cross-border group relief

Michael Molenaars opened his presentation with a case study and provided an overview of the principles of the Dutch group relief system. He explained that, from a Dutch tax perspective, the domestic group relief provisions can be utilised in pre-M&A planning to preserve existing pre-fiscal unity tax loss carry-forwards. In this context, he highlighted a recent Dutch Supreme Court judgment on this topic, which found in favour of the taxpayer. He outlined the relevant facts and circumstances and presented the Court’s key arguments.

Molenaars stressed that the Court expressly found no abusive element in the use of the group relief. He also noted that there has been no official response from the Dutch tax authorities so far, which creates some legal uncertainty as to how they will approach this issue in practice.

Losses survival in mergers and reorganisations

Engers began his presentation on loss survival in mergers and reorganisations with a case study. He then gave a brief overview of the basic concept of loss forfeiture in the course of a merger under German tax law. He also shared practical insights and strategies on potential mitigation measures that could be taken into account when planning the merger structure. In particular, Engers explained the available step-up concepts at fair-market value or at an intermediate value, the latter being a unique feature of German tax law. In this context, he also discussed the pro rata concept, which prevents cherry picking when allocating the step-up. He further highlighted the option to combine the step-up concept available under the German merger rules with the German concept of minimum taxation (which contains certain caps on the utilisation of loss carry-forwards) to achieve the most beneficial structure. Engers then addressed the limits of structuring and planning from a German tax perspective, for example selling the most valuable asset pre-merger to generate ‘usable’ income to utilise loss carry-forwards and to create a step-up for future depreciation. In this regard, he particularly emphasised the concept and application of the German anti-abuse rules.

Mantegazza then continued with a case study on loss carry-forward survival in mergers and reorganisations from an Italian tax perspective. He briefly outlined the limitations under Italian tax law on the use of tax losses in scenarios involving mergers, de‑mergers and contributions of a going concern. In particular, Mantegazza described the requirements and operation of the vitality test, the limitation based on the economic or accounting value of the net equity and the intra‑group relief concept. He noted that these limitations may be set aside following a ruling by the Italian tax authorities. Mantegazza went on to discuss various considerations for NOL planning from an Italian perspective in different merger structures, a division by separation and contributions of a going concern and shared some practical insights.

Castro continued with a case study on loss survival in mergers and reorganisations from a US tax perspective. He shared practical insights and considerations on how a non-US group and a US group structure can be combined. In this context, he provided an overview of the US change of control rules and the considerations that need to be taken into account in relation to existing loss carry-forwards. He noted that the first step in the planning process for that particular transaction was to decide in which country the ultimate holding company should be located. He particularly highlighted that, although in the past the US may not have been the most attractive jurisdiction for a holding company, recent developments in US tax policy, such as the side-by-side agreement for Pillar 2 purposes and the newly introduced provisions under the OBBBA, may have a positive effect in this regard. He also observed that this aligns with a broader trend of companies seeking access to the strong US capital markets, for example through a US listing.

Engers added that, from a German perspective, recent US tax policy developments may have triggered a ‘reversed trend’ and strengthened the attractiveness of the US as a holding location. Reto Heuberger highlighted that, from a Swiss perspective, access to the US capital markets is becoming increasingly important for European companies. He noted that, in the past, US tax law was often seen as an obstacle to using the US as a holding location, but that this risk has been significantly reduced by recent US tax policy developments from a European perspective. However, the main driver for companies to choose the US as a holding location should still be access to the capital markets rather than tax considerations. Molenaars emphasised the importance of the US tax benefit system for cross-border tax planning. Castro concluded that, from a US tax perspective, the expected longevity of the structure must be taken into account when planning the establishment of a US holding. The US panellists agreed that no major changes in US tax law, in particular regarding the side-by-side and tax benefit systems, are expected in the future. However, there remains a risk of changes to the corporate income tax rate.

Utilisation of NOLs: practical examples

Heuberger opened the presentation on the utilisation of NOLs from a Swiss tax perspective by providing an overview of the Swiss NOL rules. He particularly emphasised that Swiss tax law does not contain any provision that leads to the forfeiture of existing loss carry-forwards in change of control scenarios, which is very unusual in the European tax context. He then presented practical examples and shared personal insights on NOL planning from a Swiss tax perspective. He also underlined the importance of careful structuring and the application of anti-abuse rules by the Swiss tax authorities. Finally, he described a structuring trend he referred to as ‘synthetic royalties’, used mainly by US investors in the venture capital context to utilise existing tax loss carry-forwards in a Swiss target.

Engers then continued, explaining the utilisation of losses under the German minimum taxation regime, which includes certain caps. In this context, he provided a brief overview of the ruling of the German Constitutional Court and its key arguments regarding the constitutionality of the German minimum taxation provisions.

Molenaars followed with a practical example on debt restructurings and NOL planning from a Dutch tax perspective. He briefly outlined the Dutch loss carry-forward rules and highlighted a change in the provisions that had previously led to an unintended interaction between a debt waiver exemption and the statutory loss compensation rules, to the detriment of the taxpayer. He noted that this issue has been resolved as of 1 January 2025.

Foreign and permanent establishment losses

Francesco Capitta introduced the issue of loss utilisation in cross-border permanent establishment scenarios also with regards to the Court of Justice of the European Union ruling on utilisation of so-called final losses. Mantegazza continued from an Italian perspective and introduced a structure through which a European company could make use of losses accrued in an Italian permanent establishment. In this context, he particularly highlighted the differences and effects in using different structuring mechanisms, for example, a cross-border division by separation or a merger. He explicitly highlighted that Italy was also open to introducing a concept for utilisation of final losses by means of recent delegation granted to the government to modify the law, but there is currently no cross-border utilisation allowed under Italian tax law.

Molenaars then provided an overview on the latest ruling of the Dutch Supreme Court in the Aegon case. He mentioned that the Netherlands allows the deduction of losses in case of a liquidation of a foreign subsidiary, if the jurisdiction of the subsidiary does not provide relief for the non-compensated losses. The Supreme Court in its ruling specified some requirements of such loss utilisation regime in favour if the taxpayer.

The panel concluded with final remarks from the panellists. Peters-Fransen and Castro agreed that increasing complexity in cross-border cases creates new opportunities for strategic NOL planning. Engers emphasised that governments are beginning to reuse tax loss systems as a tool to support their local economies. Molenaars and Heuberger highlighted the growing importance of NOL planning in light of Pillar 2 requirements. Mantegazza closed by underlining the importance of the utilisation of cross-border and final losses.