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11 Income taxes

 

11.1 Income taxes in statement of profit or loss and reconciliation

 

2016

2017

CHF 1,000

 

 

Current income taxes 

10,748

 14,763 

Deferred income taxes

138

 (1,633) 

 

 

 

Total income taxes 

10,886

 13,130 

 

The income tax expense can be analyzed as follows:

 

 

2016

2017

CHF 1,000

 

 

Profit before taxes 

 65,428 

 79,677 

 

 

 

Tax expense based on the Group’s weighted average rate of 21.98% (2016: 19.95%)

 13,050 

 17,510 

 

 

 

Non-deductible expenses and additional taxable income

 2,115 

 260 

Tax-free income and tax reductions

 (5,229) 

 (5,444) 

Potential tax assets not recognized

 – 

 194 

Tax-deductible impairments of investments in subsidiaries (including reversal)

 (96) 

 (114) 

Changes in the structure of the Group

 – 

 794 

Effect of US tax reform1

 – 

 4 

Effect of tax rate change on opening deferred taxes (excluding US)

 210 

 25 

Changes in recognition of tax losses

 166 

 (40) 

Unrecoverable withholding tax

 (84) 

 (91) 

Underprovided in prior years 

 754 

 32 

 

 

 

Tax expense reported 

 10,886 

 13,130 

  1. Effect of adjusting the existing deferred taxes on the enactment date (December 22, 2017) and applying the new (lower) tax rate on changes in temporary differences after that date

The tax rate of the Group is the weighted average tax rate obtained by applying the currently effective rate for each individual jurisdiction to its respective profit before taxes. As a result of changes in the country mix of the profit before taxes, the Group’s expected tax rate for 2017 increased to 21.81%. 

 

The US tax reform will reduce the weighted average tax rate as from January 1, 2018.

 

11.2 Deferred income taxes

 

11.2.1 Overview

Deferred taxes are included in the balance sheet as follows:

 

 

2016

2017

CHF 1,000

 

 

Deferred tax assets

16,204

 15,342 

Deferred tax liabilities

(14,752)

 (11,587) 

 

 

 

Net deferred tax asset at December 31

1,452 

 3,755 

 

Deferred tax assets and liabilities are attributable to the following:

 

 

2016

Change 2017

2017

CHF 1,000

 

 

 

Net deferred tax assets arising from temporary differences

 

 

 

 Receivables

(275)

 97 

 (178) 

 Inventories

4,906

 (341) 

 4,565 

 Property, plant and equipment

(1,098)

 645 

 (453) 

 Intangible assets

(11,337)

 3,760 

 (7,577) 

 Liabilities and accrued expenses

8,293

 661 

 8,954 

 Provisions

2,987

 (1,928) 

 1,059 

 Other

(590)

 (483) 

 (1,073) 

 Subtotal net deferred tax assets arising from temporary differences

2,886

 2,411 

 5,297 

 

 

 

 

Deferred taxes provided on expected dividends from subsidiaries

(1,754)

 91 

 (1,663) 

Potential tax benefits from tax loss carry-forwards

320

 (199) 

 121 

 

 

 

 

Net deferred tax asset at December 31

1,452

 2,303 

 3,755 

 

 

 

 

Deferred taxes recognized in profit or loss

(138)

 

 1,633 

Deferred taxes recognized in other comprehensive income

569

 

 608 

Deferred taxes recognized in equity

(283)

 

 259 

Acquisition through business combination

(7,049)

 

 (218) 

Translation differences

(124)

 

 21 

Total change compared with previous year

(7,025)

 

 2,303 

Temporary differences on intangible assets primarily relate to assets recognized during the purchase price allocation process for business combinations.

 

11.2.2 Potential tax benefits from tax loss-carry forwards

Tax loss carry-forwards:

 

 

Gross value of tax loss carry forwards not capitalized

Potential tax benefits

CHF 1,000

2016

2017

2016

2017

Expiring in 

 

 

 

 

 1st – 5th year

 

 

– 

– 

 6th year or beyond

 

 

– 

– 

 Unlimited

 

 

320

 121 

 

 

 

 

 

Tax loss carry-forwards capitalized at December 31

 

 

320

 121 

 

 

 

 

 

Expiring in 

 

 

 

 

 1st – 5th year

977

– 

244

– 

 6th year or beyond

– 

– 

– 

– 

 Unlimited

– 

– 

– 

– 

 

 

 

 

 

Tax loss carry-forwards not capitalized

977

– 

244

– 

 

 

 

 

 

Total tax loss carry-forwards

977

– 

564

 121

 

11.2.3 Unrecognized deferred tax liabilities

At December 31, 2017, there were temporary differences of CHF 258.6 million related to investments in subsidiaries for which no deferred tax liabilities were recognized since the Group controls the timing of reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The corresponding unrecognized amount is not material.

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