Carrying Forward a Tax Loss

A company that spends more than it earns in a given year does not simply write the shortfall off. Under the Income Tax Act, the shortfall can usually be carried forward and set against profits of later years. Understanding how tax losses carry forward in Mauritius matters most at the point where a start-up turns profitable, or where a business changes hands.

This page covers the mechanics, the time limit, the categories treated differently, and the events that can cost a company its losses. It gives general information; whether a particular loss is usable depends on the facts, and an adviser should review it.

How a tax loss arises and is carried forward

A tax loss is a tax concept, not an accounting one. A company can report a loss in its annual financial statements and still show a different figure in its tax computation, because some expenses are adjusted and some are not deductible. The starting point for the tax figure is therefore the computation, as explained in the guide to deductible business expenses.

When the computation produces a negative result, that result is the loss for the income year. The company reports it in its corporate income tax return, and it is then available to reduce chargeable income in subsequent years, subject to the rules below.

The relief works only against future profits. It does not generate a refund of tax paid in earlier years, and it does not turn into cash if the company never becomes profitable.

How long a loss can be carried forward

According to the Mauritius Revenue Authority, the tax losses of a company can be carried forward over the five following income years. This is the answer to the common search about the loss carry forward years in Mauritius: the clock is limited, and a loss that is not absorbed within the window lapses.

Two practical consequences follow:

• A loss incurred in a year with little activity can expire unused if profits arrive late.
• Planning matters. A company expecting a slow start should keep its computations clean, so that each year's loss is documented from the outset.

Losses that are not limited in time

The same official source states that some categories of loss can be carried forward without limit of time:

• losses arising from capital allowances (see capital allowances on equipment and vehicles);
• losses linked to deep ocean water projects;
• losses linked to research and development.

The reason this matters is that a company investing heavily in equipment may see a large part of its loss come from allowances rather than from trading. That part is treated differently from an ordinary trading loss. How a mixed loss is split between the two categories, and in which order the relief is applied, is a computation question for the adviser who prepares the return.

What can make a company lose its tax losses

A change of more than half of the shareholding

The carry-forward is restricted where there is a change of more than 50% in the shareholding of the company. The rule exists to stop loss-making companies being bought only for their tax history. It means a sale, a restructuring, an entry of new investors or a transfer between related holders deserves a loss check before it is signed.

The details of the restriction, and how it interacts with a continuing business, are not set out here. A transaction that moves the ownership across that line should be reviewed against the Income Tax Act itself.

The window running out

An ordinary trading loss that has not been used within the five following income years is gone. There is no extension on request.

Poor records

A loss that cannot be proved cannot be used. The MRA can examine returns, and a loss claimed in one year may be tested several years later, when the company starts to use it. Keep the supporting computations and books for the whole carry-forward period, and see the guide on preparing for an MRA tax review for how that review tends to unfold.

Does the loss remove every charge?

A carried-forward loss reduces chargeable income. It does not necessarily remove every charge a company may meet:

• The standard corporate rate is 15% of chargeable income for income years beginning on or after 1 July 2010. A loss reduces the income to which the rate applies. The wider picture is in how a Mauritius company is taxed on its profits.
• The Alternative Minimum Tax (section 44A) provides that where a company's normal tax is below 10% of its adjusted book profit, the tax payable equals 10% of that adjusted book profit. It applies from the income year beginning on 1 July 2026. It targets hotels, insurers, financial intermediaries, property companies and telecommunications companies, and it does not apply to a global business entity. Because the test starts from book profit rather than taxable profit, a business within scope should ask its adviser how its losses are treated.
• The Corporate Climate Responsibility Levy is 2% of chargeable income for income years beginning on or after 1 July 2024 (section 50O). No levy is due where the company's turnover for the income year does not exceed MUR 50 million.
• The solidarity levy (section 50J) is 5% of accounting profit and 1% of turnover for operators in scope, from the income year beginning on 1 July 2024. Where there is a loss, the 1% of turnover element is what applies.
• The CSR fund is 2% of the previous year's chargeable income (section 50L), so a company coming out of a loss period will see the CSR base follow the recovery. See CSR contribution for Mauritian companies.

A company in a loss position can therefore still have levies to consider. Which of them apply depends on its sector, its turnover and its licence.

A quick way to test your position

The tree below is a first screening, not an opinion. It identifies when a loss is likely to be usable and when a closer check is needed.

Claiming a loss step by step

Companies managed from abroad

A company incorporated in Mauritius but centrally managed and controlled outside Mauritius is treated as non-resident under section 73A. It must still file an income tax return under section 116. Where a company is run from another country, the location of management should be settled before anyone relies on a loss, as the choice affects the whole tax position. The guides on running a company from South Africa, India and the United Kingdom show how that question typically arises.

Keeping the loss alive in practice

• Record each loss by year and category, so you know which part expires and which does not.
• File returns on time: an unfiled return leaves a loss unreported.
• Put ownership changes through a tax check before completion.
• Align the loss schedule with the board's yearly routine, as shown in the holding company year example.

For the full list of yearly tasks, the annual compliance checklist shows where the loss schedule fits.