1.6 Income taxes
Income tax expense
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Current income taxes | 28.0 | 32.0 | ||
| Deferred income taxes | (15.2) | (11.9) | ||
| Total | 12.8 | 20.1 |
Analysis of tax expense
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Income / (loss) before taxes (EBT) | 8.2 | 852.8 | ||
| Weighted average income tax rate | 25.2% | 19.5% | ||
| Expected tax expense (using weighted average tax rates) | 2.1 | 166.3 | ||
| Credits and income taxes incurred from previous periods | (0.7) | 0.2 | ||
| Use of previously unrecognised loss carryforwards | (0.6) | (0.4) | ||
| Unrecognised deferred tax assets on tax loss carryforwards | 1.3 | 2.0 | ||
| Expiry of capitalised tax loss carryforwards | – | 1.1 | ||
| Impact of Swiss participation exemption and other non-taxable items | 2.5 | (47.7) | ||
| Expenses not deductible from tax and income not credited to the income statement | – | 0.0 | ||
| Change in deferred taxes due to change in tax rates | (0.6) | 0.0 | ||
| Tax effects on investments | 8.5 | (101.4) | ||
| Other impacting items | 0.2 | (0.1) | ||
| Income taxes | 12.8 | 20.1 | ||
| Effective tax rate | 156.7% | 2.4% |
The expected average tax rate equals the weighted average of the rates of the consolidated companies. Both positive and negative results for the individual companies feed into the calculation for the expected tax rate, taking into account the applicable tax rates in each case.
The effective tax rate changed from 2.4 per cent to 156.7 per cent. The difference compared with the expected tax rate was mainly due to the impact of participation exemption and other non-taxable income as well as the tax effects on investments.
The tax effects on investments include tax-neutral changes in value arising from the reassessment of investments in associates / joint ventures and the impact resulting from value allowances and reversals of value allowances on investments under commercial law (without any deferred tax consequences), and also increased tax expenses for 2022. In the previous year, the write-up in value of the TX Group’s shares in the SMG Swiss Marketplace Group AG joint venture, which was reflected in the income statement through the financial result in the amount of CHF 778.5 million, was also included. The impact of participation exemption and other non-taxable income in 2022 is attributable to the elimination (without any deferred tax consequences) of accountable taxable sales proceeds. In 2021, the greatest impact was due to participation exemption and other non-taxable income from the sale of 10 per cent of the shares in SMG Swiss Marketplace Group AG.
Unrecognised deferred tax assets on tax loss carryforwards result from the estimate that, based on their income situation, the relevant companies do not fulfil the prerequisites for the realisation of losses.
On 8 October 2021, 136 countries agreed on a two-pillar concept for international tax reform (the OECD Inclusive Framework). The recommendations under the first pillar of the Inclusive Framework include a reallocation of part of the taxes to the market countries, while the second sets the objective of a global effective minimum tax rate of 15 per cent. The introduction of the OECD Inclusive Framework will lead to amendments to tax laws and rates for legal entities in various countries in the coming years. The impact of these amendments on the valuation of tax assets and liabilities depends, amongst other factors, on the type and timing of the amendments to the laws in the individual countries. TX Group could be subject to a top-up tax under the second pillar as it has subsidiaries in areas of Switzerland where the statutory tax rate is currently below 15 per cent. TX Group is therefore monitoring the progress of the legislative procedure in each country in which the Group operates. As of 31 December 2022, there was insufficient information to determine the potential quantitative impact.
Deferred tax assets and liabilities
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Property, plant and equipment | 0.0 | 0.0 | ||
| Employee benefit obligations | 1.1 | 4.1 | ||
| Intangible assets | 0.0 | 0.0 | ||
| Capitalised tax loss carryforwards | 11.8 | 8.1 | ||
| Provisions | – | 0.3 | ||
| Other balance sheet items | 0.2 | 0.1 | ||
| Total deferred tax assets, gross | 13.1 | 12.5 | ||
| Trade accounts receivable | (1.1) | (1.1) | ||
| Property, plant and equipment | (13.9) | (15.5) | ||
| Financial assets | (0.1) | (0.2) | ||
| Employee benefit plan assets | (5.8) | (62.3) | ||
| Intangible assets | (76.1) | (84.2) | ||
| Provisions | (2.7) | (2.7) | ||
| Other balance sheet items | (0.5) | (0.2) | ||
| Total deferred tax liabilities, gross | (100.2) | (166.2) | ||
| Total deferred taxes, net | (87.0) | (153.7) | ||
| of which deferred tax assets stated in the balance sheet | 10.5 | 2.4 | ||
| of which deferred tax liablities stated in the balance sheet | (97.6) | (156.1) |
The change in deferred taxes is shown in the following table:
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| As of 1 January | (153.7) | (136.7) | ||
| Change in group of consolidated companies | – | 12.6 | ||
| Deferred tax income | 15.2 | 11.9 | ||
| Taxes on other comprehensive income | 51.0 | (41.7) | ||
| Currency translation differences | 0.6 | 0.1 | ||
| As of 31 December | (87.0) | (153.7) |
Tax loss carryforwards
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Capitalised tax loss carryforwards | 11.8 | 8.1 | ||
| Weighted average income tax rate | 16.4% | 17.1% | ||
| Corresponding to effective tax loss carryforwards | (71.8) | (47.2) | ||
| Due after 1 year | – | – | ||
| Due after 2 to 5 years | (18.5) | (8.8) | ||
| Due after more than 5 years | (53.3) | (38.4) |
As of 31 December 2022, (net) deferred tax assets of CHF 3.3 million (previous year: CHF 5.6 million) had been capitalised for companies that suffered losses in this or the previous year. Of the non-capitalised loss carryforwards from 2021, loss carryforwards in the amount of CHF 37.9 million related to the liquidation of MetroXpress A/S in 2022.
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Non-capitalised tax loss carryforwards | (23.8) | (87.9) | ||
| Due after 1 year | – | (17.1) | ||
| Due after 2 to 5 years | – | (1.8) | ||
| Due after more than 5 years | (23.8) | (69.0) |
Significant judgements or estimates
Uncertainties with regard to correct treatment of income tax may result in definitive tax assessments only being available several years after the reporting year. Before this assessment by the tax authorities, an income tax assessment must be performed at the time of the financial statements’ publication. The uncertainty determined corresponds with either the expected value or the most likely value depending on which value best reflects the uncertainty.
Accounting policies
Current income taxes are recognised in the period to which they relate on the basis of the local net income / (loss) reported by the consolidated companies in the reporting year.
Deferred tax liabilities resulting from measurement differences between tax and consolidated values are calculated and recognised using the liability method. In the process, all temporary differences between the values included in the tax returns and those in the consolidated financial statements are taken into consideration. The tax rates used are the anticipated local tax rates. Depending on the underlying transaction, any change in deferred taxes is either recognised in the income statement in net income / (loss) or directly in other comprehensive income as equity.
Deferred tax loss carryforwards and deferred taxes arising from temporary differences are only capitalised if it is likely that gains will be realised in future that would allow the loss carryforwards or the deductible differences to be offset for tax purposes.