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In the wake of the effects of the Covid 19 pandemic, a number of income tax relief measures were enacted in Austria to cushion severe economic consequences from the lockdown measures. Among other things, the Economic Stimulus Act 2020 introduced a temporary loss carryback into the Income Tax Act for this purpose. Compared to the loss carryforward, the loss carryback carries back a loss to a previous period. This loss (retroactively) reduces the tax base on which tax has already been paid. This process triggers a tax credit, so that liquid funds are generated.This paper deals with the extent to which the release of liquidity could theoretically prevent insolvency. A binomial model is used to simulate several periods under different initial situations in order to assess the effect of the loss carryback in any scenario.
About the author
Niklas Mark, MSc. Studium der Wirtschaftswissenschaften bzw. Accounting, Auditing and Taxation an der Universität für Sozial- und Wirtschaftswissenschaften in Innsbruck. Steuersachbearbeiter, Imst/Tirol.
