21 Income taxes
Current income taxes
Current income taxes are determined on the basis of the results for the reporting year, taking account of national tax laws in the relevant jurisdictions.
Deferred taxes
Deferred taxes are recognized using the liability method. Deferred taxes reflect the income tax impact of temporary differences between the balance sheet values relevant for the consolidated financial statements and the values that are relevant for tax assessments.
Deferred tax liabilities are recognized on all taxable temporary differences, whereas deferred tax assets are only recognized if it is probable that future profits will be available against which these assets can be offset for tax purposes. Forecasts and the interpretation of existing tax laws and regulations serve as the basis for the assumptions of whether such future offsetting is probable.
Changes in deferred tax assets and liabilities are recognized as income tax expenses, in OCI, or directly in equity, according to where the underlying transaction that led to the change in deferred taxes is recognized.
Uncertain tax positions
Uncertainties regarding the correct tax treatment can arise from risks resulting from final tax assessments that are only made several years after the end of the reporting year. Where there is uncertainty over whether the Group’s tax treatment will be accepted by the tax authority, the Group is required to reflect this uncertainty in the consolidated financial statements. The uncertainty is reflected by an expected value or the single most likely amount, whichever is more appropriate.
The income tax expenses recognized in the income statement are as follows:
| In CHF million | 2023 | 2022 | ||
|---|---|---|---|---|
| Current income taxes for the reporting year | 251 | 229 | ||
| Current income taxes from previous years | –1 | 1 | ||
| Deferred income taxes | –10 | –36 | ||
| Total income taxes | 240 | 194 |
The reconciliation of income tax expenses is as follows:
| In CHF million | 2023 | 2022 | ||
|---|---|---|---|---|
| Profit before taxes | 1 175 | 853 | ||
| Weighted average income tax rate – expected | 20.4% | 21.3% | ||
| Expected income tax expenses | 240 | 182 | ||
| Effects of | ||||
| Recognition/utilization of unrecognized tax loss carryforwards | –4 | –12 | ||
| Other non-taxable income/other non-deductible expenses | –4 | 6 | ||
| Non-refundable withholding taxes | 15 | 17 | ||
| Current income taxes from previous years | –1 | 1 | ||
| Other differences | –6 | – | ||
| Total income taxes | 240 | 194 | ||
| Weighted average income tax rate – effective | 20.4% | 22.7% |
The Group is subject to taxes in different countries around the world. The weighted average income tax rate is calculated using the enacted tax rates for the individual Group companies in each jurisdiction. Due to the composition of the Group’s taxable income, as well as changes in local tax rates, the average tax rate usually varies from year to year.
The Group falls within the scope of the OECD Pillar Two model rules and is currently assessing the extent to which it will be affected when these rules come into force. The Group’s income tax expense is not expected to change significantly. In 2023, Schindler adopted the amendments to IAS 12 - Income taxes relating to the OECD Pillar Two model rules.
Deferred taxes
Deferred taxes arise from the following positions in the consolidated balance sheet:
| 2023 | 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In CHF million | Deferred tax assets | Deferred tax liabilities | Net book value | Deferred tax assets | Deferred tax liabilities | Net book value | ||||||
| Current assets | 139 | –41 | 98 | 149 | –42 | 107 | ||||||
| Property, plant, and equipment | 4 | –19 | –15 | 3 | –25 | –22 | ||||||
| Intangible assets | 11 | –94 | –83 | 17 | –121 | –104 | ||||||
| Current liabilities | 90 | –36 | 54 | 105 | –44 | 61 | ||||||
| Provisions | 73 | –16 | 57 | 84 | –17 | 67 | ||||||
| Employee benefits | 53 | – | 53 | 53 | –3 | 50 | ||||||
| Others | 3 | –27 | –24 | 2 | –17 | –15 | ||||||
| Tax loss carryforwards | 10 | 10 | 18 | 18 | ||||||||
| Net deferred taxes | 150 | 162 | ||||||||||
| thereof deferred tax assets | 291 | 305 | ||||||||||
| thereof deferred tax liabilities | –141 | –143 | ||||||||||
The Group applies the exception of IAS 12 - Income taxes to recognizing and disclosing information about deferred tax assets and liabilities related to OECD Pillar Two model rules.
Changes in net deferred taxes are as follows:
| In CHF million | 2023 | 2022 | ||
|---|---|---|---|---|
| January 1 | 162 | 149 | ||
| Addition and reversal of temporary differences | ||||
| recognized in the income statement | 10 | 36 | ||
| recognized in OCI | 6 | –1 | ||
| Business combinations | –10 | –15 | ||
| Exchange differences | –18 | –7 | ||
| December 31 | 150 | 162 |
Tax loss carryforwards
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In CHF million | Loss carry-forwards | Tax effects | Loss carry-forwards | Tax effects | ||||
| Total | 205 | 43 | 254 | 55 | ||||
| Recognized as deferred tax assets | –42 | –10 | –85 | –18 | ||||
| Total unrecognized | 163 | 33 | 169 | 37 | ||||
| thereof expiring | ||||||||
| < 1 year | – | – | 3 | 1 | ||||
| 1–5 years | 53 | 8 | 40 | 6 | ||||
| > 5 years | 110 | 25 | 126 | 30 | ||||
Unrecognized deferred tax assets
| In CHF million | 2023 | 2022 | ||
|---|---|---|---|---|
| Temporary differences | 8 | 8 | ||
| Tax loss carryforwards | 163 | 169 | ||
| Total basis | 171 | 177 | ||
| Unrecognized deferred tax assets | 35 | 39 | ||
| Average tax rate | 20.5% | 22.0% |