13 INCOME TAXES
13.1 INCOME TAXES IN STATEMENT OF PROFIT OR LOSS AND RECONCILIATION
| 2020 | 2021 |
CHF 1,000 |
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Current income taxes | 19,377 | 32,118 |
Deferred income taxes | (4,835) | (15,852) |
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Total income taxes | 14,542 | 16,266 |
The income tax expense can be analyzed as follows:
| 2020 | 2021 |
CHF 1,000 |
|
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Profit before taxes | 118,227 | 137,925 |
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Tax expense based on the Group’s weighted average rate of 17.9% (2020: 20.3%) | 24,052 | 24,635 |
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Deferred taxes: tax rate change on opening deferred taxes and tax rate used for | (336) | 2,768 |
Non-deductible expenses and additional taxable income | 352 | 4,852 |
Tax-free income and tax reductions | (378) | (2,633) |
Transitional measures from Swiss tax reform | (10,364) | (12,580) |
Impact of tax losses | (117) | 106 |
Impact of investment in subsidiaries and investments at FVOCI | 953 | (779) |
Unrecoverable withholding tax | (76) | 652 |
Under/(over)provided in prior years | 456 | (755) |
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Tax expense reported | 14,542 | 16,266 |
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 2021 decreased to 17.9%.
13.2 DEFERRED INCOME TAXES
13.2.1 Amounts recognized in the financial statements
Amounts recognized and movements in deferred tax assets and liabilities:
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| 31.12.2020 |
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| Net | Recognized | Translation differences | Net | Deferred tax assets | Deferred tax liabilities | ||
| in profit or loss | in OCI1 | directly in equity | |||||
CHF 1,000 |
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Deferred taxes arising from temporary differences |
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Receivables and contract assets | (585) | (126) | - | - | (24) | (735) | 267 | (1,002) |
Inventories | 6,154 | 3,113 | - | - | (333) | 8,934 | 9,466 | (532) |
Property, plant and equipment | (444) | 242 | - | - | 35 | (167) | 465 | (632) |
Right-of-use assets | (9,503) | 1,453 | - | - | 264 | (7,786) | 1 | (7,787) |
Intangible assets | (10,857) | 654 | - | - | 708 | (9,495) | 13 | (9,508) |
Liabilities and accrued expenses | 12,617 | 480 | - | - | (602) | 12,495 | 12,495 | - |
Liability for post-employment benefits |
9,477 | (71) | 3,588 | - | (10) | 12,984 | 12,984 | - |
Provisions | 1,708 | (1,679) | - | 1,950 | (97) | 1,882 | 6,412 | (4,530) |
Other | (287) | 288 | - | - | (6) | (5) | 479 | (484) |
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Subtotal | 8,280 | 4,354 | 3,588 | 1,950 | (65) | 18,107 | 42,582 | (24,475) |
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Expected tax benefits from |
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Tax loss carry-forwards | 8,049 | (1,288) | - | - | (600) | 6,161 | 6,161 | - |
Swiss tax reform | 3,635 | 1,693 | - | - | - | 5,328 | 5,328 | - |
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Deferred taxes provided on expected dividends from subsidiaries |
(1,884) | 76 | - | - | - | (1,808) | - | (1,808) |
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Offsetting |
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| (21,910) | 21,910 |
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Total | 18,080 | 4,835 | 3,588 | 1,950 | (665) | 27,788 | 32,161 | (4,373) |
1 Other comprehensive income
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31.12.2021 |
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Net balance at January 1 |
Recognized |
Acquired in business combination |
Translation differences |
Net |
Deferred tax assets |
Deferred tax liabilities |
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in profit or loss |
in OCI1 |
directly in equity |
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CHF 1,000 |
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Deferred taxes arising from temporary differences |
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Receivables and contract assets |
(735) |
852 |
- |
- |
(3,990) |
(27) |
(3,900) |
635 |
(4,535) |
Inventories |
8,934 |
6,219 |
- |
- |
3,327 |
78 |
18,558 |
19,075 |
(517) |
Property, plant and equipment |
(167) |
(91) |
- |
- |
(3,202) |
(37) |
(3,497) |
228 |
(3,725) |
Right-of-use assets |
(7,786) |
6,848 |
- |
- |
(12,241) |
(63) |
(13,242) |
290 |
(13,532) |
Intangible assets |
(9,495) |
(600) |
- |
- |
(76,030) |
(754) |
(86,879) |
- |
(86,879) |
Liabilities and accrued expenses |
12,495 |
(2,419) |
- |
- |
12,155 |
150 |
22,381 |
22,478 |
(97) |
Deferred revenue |
- |
4,343 |
- |
- |
- |
(6) |
4,337 |
4,337 |
- |
Liability for post-employment benefits |
12,984 |
370 |
(4,398) |
- |
- |
(35) |
8,921 |
8,921 |
- |
Provisions |
1,882 |
(608) |
- |
650 |
1,649 |
25 |
3,598 |
8,747 |
(5,149) |
Other |
(5) |
(181) |
- |
- |
(351) |
(9) |
(546) |
220 |
(766) |
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Subtotal |
18,107 |
14,733 |
(4,398) |
650 |
(78,683) |
(678) |
(50,269) |
64,931 |
(115,200) |
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Expected tax benefits from |
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Tax loss carry-forwards |
6,161 |
(1,656) |
- |
- |
- |
189 |
4,694 |
4,694 |
- |
Swiss tax reform |
5,328 |
3,427 |
- |
- |
- |
- |
8,755 |
8,755 |
- |
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Deferred taxes provided on expected dividends from subsidiaries |
(1,808) |
(652) |
- |
- |
- |
- |
(2,460) |
- |
(2,460) |
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Offsetting |
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(47,699) |
47,699 |
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Total |
27,788 |
15,852 |
(4,398) |
650 |
(78,683) |
(489) |
(39,280) |
30,681 |
(69,961) |
1 Other comprehensive income
Temporary differences on intangible assets primarily relate to assets recognized during the purchase price allocation process for business combinations.
13.2.2 Expected tax benefits from tax loss carry-forwards
Deferred tax assets related to tax loss carry-forwards:
| Gross value of tax loss | Expected tax benefits | ||
| 31.12.2020 | 31.12.2021 | 31.12.2020 | 31.12.2021 |
CHF 1,000 |
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Expiring in |
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1st - 5th year |
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| - | - |
6th year or beyond |
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| 3,817 | 2,678 |
Unlimited |
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| 2,344 | 2,016 |
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Tax loss carry-forwards capitalized |
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| 6,161 | 4,694 |
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Expiring in |
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1st - 5th year | - | - | - | - |
6th year or beyond | 11,393 | 13,262 | 796 | 926 |
Unlimited | - | - | - | - |
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Tax loss carry-forwards not capitalized | 11,393 | 13,262 | 796 | 926 |
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Total tax loss carry-forwards | 11,393 | 13,262 | 6,957 | 5,620 |
13.2.3 Expected tax benefits from the Swiss tax reform
On May 19, 2019, the Swiss electorate passed the Federal Act on Tax Reform and AHV Financing (TRAF). The tax reform abolishes the tax regimes for holding, domiciliary and mixed companies as of January 1, 2020 and introduces new tax measures. To the extent that the tax reform requires cantonal and communal tax law changes, these have to be implemented through modification of the cantonal tax law. On September 1, 2019, in a public vote, the electorate of the canton of Zurich accepted the respective revision of the cantonal tax law. The relevant changes to the Group include a decrease in the statutory income tax rate in the canton of Zurich, effective as from January 1, 2021.
As part of the TRAF and cantonal tax practice, transitional measures were introduced in order to ease the transition from the current reliefs to the new tax measures. For the Group, these measures allow amongst others the tax-effective amortization of a step-up amount over a period of up to 10 years.
Expected tax benefits related to the step-up mechanism that are not capitalized at year-end:
| Gross value of tax benefits not capitalized | Expected tax benefits | |||
| Year | 31.12.2020 | 31.12.2021 | 31.12.2020 | 31.12.2021 |
CHF 1,000 |
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Tax benefits available for |
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Federal taxes | 2026/27 - 2029 | 39,911 | 24,806 | 2,758 | 1,714 |
Cantonal taxes | 2025 - 2029 | 387,839 | 354,749 | 45,610 | 41,718 |
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Tax benefits not capitalized | 427,750 | 379,555 | 48,368 | 43,432 |
13.2.4 Unrecognized deferred tax liabilities
At December 31, 2021, there are temporary differences of CHF 1’290.9 million (2020: CHF 445.6 million) related to investments in subsidiaries for which no deferred tax liabilities are 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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