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Financial Dictionary - Capital losses

Capital losses

In financial terms, 'capital losses' refers to the loss of value that occurs as a result of the difference between the purchase price of the shares in an investment fund and their sale at a lower price.

The market undergoes constant fluctuations and these variations in value are called capital gains when prices increase and capital losses when they decrease. Capital losses can affect the price of securities as well as fixed assets.

Both capital gains and losses have to be declared on your annual tax return.

If the profit and loss balance is negative at the end of the year, this amount could be offset by the positive balance in the same period of another component of the savings tax base, which is largely made up of capital gains derived from interest on accounts, bonds, debentures and dividends.

This compensation of losses with the positive balance obtained during the same period has a limit of 25% of the positive balance. If the balance is still negative after compensation, the amount may be offset during the following four years.

Income from work, economic and professional activities cannot be used for this compensation.

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