Tax Refund Opportunity: Carry-Back and COVID-19

In a decision dated May 9, 2025, the Council of State partially overturned the BOFiP regarding the exceptional provision— adopted during the COVID-19 pandemic—allowing tax losses to be carried back.

The Council of State has ruled that, in the event of a tax reassessment for a fiscal year in which losses could have been carried back, taxpayers may—contrary to what was stated in the BOFiP—request to carry forward “COVID” losses against the reassessed amount.

As a reminder, unlike the general rules, this special regime provided for:

• an allocation across the last three fiscal years (i.e., 2017, 2018, and 2019 for a company with a fiscal year-end of December 31, 2020);

• There is no limit on the amount of losses that can be carried back.

In practice, who is affected?

For companies (or consolidated groups) with a fiscal year-end of December 31, this refers to companies that:

• incurred a deficit during the fiscal year ended in 2020;

• this deficit has not been used to date;

• were restated for the 2017, 2018, or 2019 fiscal years.

These companies or consolidated groups may be able to request that the 2020 loss be offset against adjustments made for the 2017, 2018, and 2019 fiscal years.

More generally, companies with fiscal years ending between June 30, 2020, and June 30, 2021, that reported a loss for that fiscal year may be eligible to request that the loss be offset against adjustments made to the three fiscal years preceding it.

As a reminder, dividend distributions made during the fiscal years against which the losses are carried back may reduce the amount of the carry-back credit.

What is the deadline for filing a claim?

The Council of State has already ruled, with regard to the carryback provision set forth in Article 220 quinquies of the General Tax Code, that:

• a request to carry back losses following an adjustment to prior-year earnings constitutes a claim;

• The collection of taxes from prior years that increases the taxable income for those years constitutes an event within the meaning of Article R. 196-1(c) of the General Tax Code.

Thus, companies have until December 31 of the second year following receipt of thetax bill file a claimtax bill their “COVID” loss be carried back.

In practice, if a company that reported a loss in the 2020 fiscal year receives a reassessment proposal the 2017 fiscal year in December 2020 and a tax bill those taxes in 2023, it will have until December 31, 2025, to file a claim.

If the company received a tax bill 2022, it would generally have until December 31, 2024, to file a claim. However, depending on the circumstances, it may be possible to extend this deadline by an additional year, expiring on December 31, 2025.

If you would like to discuss these topics, please feel free to contact us.