Tax loss carryforward
In one sentenceA tax loss the business made in a previous year that the law allows to be deducted from the profits of following years within a limit set by the Implementing Regulations.
Simply put
The loss is not lost: it is carried forward to the coming years to reduce the tax when the business returns to profit.
But the deduction is not unlimited: the Regulations set a limit on how much can be deducted each year, the rest continues to be carried forward, and a major change in ownership may affect the right to carry forward.
Example
A company made a tax loss in its first year and then a profit in its second: it deducts part of the first year's loss from the second year's profit up to the limit the Regulations allow, and carries forward the rest to the third year.
Don't confuse it with
Retained earningsRetained earnings are an accounting item in equity, while carried-forward losses are a tax balance deducted from future profits.