Taxes: How to Avoid the Restriction on Loss Offset As a professional translator of news articles, it is my responsibility to accurately convey the information presented in German news articles to an English-speaking audience. In this article, we will discuss how to navigate the restriction on loss offset in taxes. The restriction on loss offset, also known as „VerlustverrechnungsbeschrĂ€nkung“ in German, refers to the limit placed on the amount of losses that can be offset against profits for tax purposes. This restriction was put in place to prevent companies from using losses to reduce their tax liability. However, there are certain strategies that can be used to legally minimize the impact of this restriction. The first and most important step is to carefully plan your investments and business activities in order to generate profits and minimize losses. Another strategy is to utilize tax laws and regulations to your advantage. For example, in some cases, losses from one year can be carried forward and offset against profits in future years. This can help to reduce the overall tax burden. It is also important to regularly review and adjust your tax planning strategies to adapt to any changes in tax laws or regulations. Seeking the advice of a tax professional can also be beneficial in navigating the restriction on loss offset. In conclusion, while the restriction on loss offset can be a hurdle for businesses and individuals, there are legal ways to minimize its impact. With careful planning and utilizing tax laws to your advantage, you can successfully navigate this issue and optimize your tax liability.

Last Updated: 19. Januar 2024By

In my previous post, I had given you an example of how the current practice of tax authorities to limit the offsetting of losses in futures trading is likely unlawful, but at the very least, unreasonable.

However, since we still need to wait for a decision from the Federal Constitutional Court, I recommend that you do not fall under the clauses of the „Future Financing Act“ in the first place. Then you won’t have to go through the hassle and expense of filing a complaint. Fortunately, this is easier than you might think. Read my tips today to find out how.

How to avoid the loss offset restriction in futures trading First of all, the regulation that limits losses to a maximum of 20,000 EUR only applies to futures trading. The Federal Ministry of Finance (BMF) clarified what exactly constitutes futures trading in mid-2021. This includes primarily options trading, foreign exchange futures, contracts for difference (CFDs), and futures.

However, CFDs were previously popular among private investors. Due to their tax disadvantages, this popularity has since decreased significantly. But what can you trade without having to worry about severe tax disadvantages?

These financial instruments remain advantageous for you The BMF has also made it clear that stocks and derivatives (leveraged instruments) such as certificates (including leveraged certificates) and warrants are still advantageous for you.

You can still offset losses and gains first. Only the remaining profit will be taxed afterwards.

But be aware: You can only offset stock gains with stock losses and derivative losses with derivative gains. The tax office wants this to be calculated and taxed separately by category.

By the way, there is also a pending lawsuit against this regulation. The outcome is uncertain.

But at least now you know how to avoid tax disadvantages in trading until the Federal Constitutional Court has resolved the mess that the German Bundestag has passed.

By the way: In my stock market service Voigts Global Profits, we have always traded with stocks and leveraged certificates. So the problem of tax disadvantages never arose, otherwise I would have recommended other instruments to my readers.

As you can see, as chief analyst, I also keep an eye on such issues for my readers.