12 Income taxes
12.1 Income taxes in statement of profit or loss and reconciliation
| 2017 | 2018 |
CHF 1,000 |
|
|
Current income taxes | 14,763 | 16,537 |
Deferred income taxes | (1,701) | (3,835) |
|
|
|
Total income taxes | 13,062 | 12,702 |
The income tax expense can be analyzed as follows:
| 2017 (Restated) | 2018 |
CHF 1,000 |
|
|
Profit before taxes | 78,992 | 83,398 |
|
|
|
Tax expense based on the Group’s weighted average rate of 20.82% (2017: 21.99%) | 17,373 | 17,360 |
|
|
|
Non-deductible expenses and additional taxable income | 260 | 609 |
Tax-free income and tax reductions | (5,375) | (5,021) |
Potential tax assets not recognized | 194 | – |
Tax-deductible impairments of investments in subsidiaries (including reversal) | (114) | (91) |
Impact of acquisitions | 794 | (540) |
Effect of US tax reform1 | 4 | – |
Effect of tax rate change on opening deferred taxes (2017 excluding US) | 25 | (377) |
Impact of tax losses | (40) | 260 |
Unrecoverable withholding tax | (91) | 216 |
Underprovided in prior years | 32 | 286 |
|
|
|
Tax expense reported | 13,062 | 12,702 |
- 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 2018 decreased to 20.82%.
12.2 Deferred income taxes
12.2.1 Overview
Deferred taxes are included in the balance sheet as follows:
| 01.01.2017 (Restated) | 31.12.2017 (Restated) | 31.12.2018 |
CHF 1,000 |
|
|
|
Deferred tax assets | 16,204 | 15,342 | 18,689 |
Deferred tax liabilities | (14,794) | (11,561) | (6,593) |
|
|
|
|
Total net deferred tax assets | 1,410 | 3,781 | 12,096 |
Deferred tax assets and liabilities are attributable to the following:
| 01.01.2017 | 31.12.2017 | Change 2018 | 31.12.2018 |
CHF 1,000 |
|
|
|
|
Net deferred tax assets arising from temporary differences |
|
|
|
|
Receivables and contract assets | (259) | (139) | (14) | (153) |
Inventories | 4,684 | 4,419 | 1,213 | 5,632 |
Property, plant and equipment | (1,098) | (453) | 408 | (45) |
Intangible assets | (11,337) | (7,577) | (2,508) | (10,085) |
Liabilities and accrued expenses | 8,419 | 9,059 | 116 | 9,175 |
Provisions | 3,025 | 1,087 | 818 | 1,905 |
Other | (590) | (1,073) | 848 | (225) |
Subtotal net deferred tax assets arising from temporary differences | 2,844 | 5,323 | 881 | 6,204 |
|
|
|
|
|
Deferred taxes provided on expected dividends from subsidiaries | (1,754) | (1,663) | (216) | (1,879) |
Potential tax benefits from tax loss carry-forwards | 320 | 121 | 7,650 | 7,771 |
|
|
|
|
|
Total net deferred tax assets | 1,410 | 3,781 | 8,315 | 12,096 |
|
|
|
|
|
Deferred taxes recognized in profit or loss |
| 1,701 |
| 3,835 |
Deferred taxes recognized in other comprehensive income |
| 608 |
| (539) |
Deferred taxes recognized in equity |
| 259 |
| (625) |
Acquisition through business combination |
| (218) |
| 5,641 |
Translation differences |
| 21 |
| 3 |
Total change compared with previous year |
| 2,371 |
| 8,315 |
Temporary differences on intangible assets primarily relate to assets recognized during the purchase price allocation process for business combinations.
12.2.2 Potential tax benefits from tax loss carry-forwards
Tax loss carry-forwards:
| Gross value of tax loss carry-forwards | Potential tax benefits | ||
| 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 |
CHF 1,000 |
|
|
|
|
Expiring in |
|
|
|
|
1st – 5th year |
|
| – | 876 |
6th year or beyond |
|
| – | 5,939 |
Unlimited |
|
| 121 | 956 |
|
|
|
|
|
Tax loss carry-forwards capitalized |
|
| 121 | 7,771 |
|
|
|
|
|
Expiring in |
|
|
|
|
1st – 5th year | – | – | – | – |
6th year or beyond | – | 21,816 | – | 1,312 |
Unlimited | – | – | – | – |
|
|
|
|
|
Tax loss carry-forwards not capitalized | – | 21,816 | – | 1,312 |
|
|
|
|
|
Total tax loss carry-forwards | – | 21,816 | 121 | 9,083 |
12.2.3 Unrecognized deferred tax liabilities
At December 31, 2018, there were temporary differences of CHF 331.0 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.
Follow Tecan