8.1 Income taxes
CHF million | 2023 | 2024 |
|---|---|---|
Current income taxes | – 28.7 | – 7.8 |
Deferred income taxes | 12.1 | 1.7 |
Income taxes | – 16.6 | – 6.1 |
The following deferred income tax effects were recognized in other comprehensive income:
CHF million | 2023 | 2024 |
|---|---|---|
Income taxes on remeasurement of defined benefit plans | 0.3 | – 2.9 |
Income taxes on currency translation differences | 0.4 | 0.0 |
Income taxes on cash flow hedges | – 0.8 | – 1.3 |
Income taxes recognized in other comprehensive income | – 0.1 | – 4.2 |
The reconciliation of expected and actual income taxes is as follows:
CHF million | 2023 | 2024 |
|---|---|---|
Expected income taxes on profit before taxes of CHF 16.5 million (2023: CHF 90.6 million) at an average rate of 20.1% (2023: 17.3%) | – 15.7 | – 3.3 |
Impact of non-deductible expenses | – 2.4 | – 1.0 |
Impact of non-taxable income/income taxed at different rates | 7.7 | 4.2 |
Impact of losses and loss carry-forwards | 11.8 | – 7.4 |
Impact of changes in tax rates and tax legislation | 0.4 | – 0.2 |
Tax effects from previous periods | – 15.4 | 2.0 |
Withholding taxes on payments from subsidiaries | – 2.9 | – 0.4 |
Other effects | – 0.1 | 0.0 |
Income taxes | – 16.6 | – 6.1 |
The expected weighted average tax rate increased by 2.8 percentage points compared to the prior year. The increase was mainly driven by changes in the profitability of certain group companies.
Deferred income taxes
The following table summarizes the movement in the net deferred income tax positions:
CHF million | 2023 | 2024 |
|---|---|---|
Deferred income tax liabilities (-)/assets (+), net at January 1 | – 0.8 | 8.9 |
Deferred income taxes recognized in the income statement | 12.1 | 1.7 |
Deferred income taxes recognized as other comprehensive income | – 0.1 | – 4.2 |
Acquisitions1 | 0.0 | – 0.6 |
Currency translation differences | – 2.3 | 0.3 |
Deferred income tax assets, net at December 31 | 8.9 | 6.1 |
1See note 2.1.
Deferred income tax assets and liabilities result from the following balance sheet items:
CHF million | Deferred income tax assets December 31, 2023 | Deferred income tax liabilities December 31, 2023 | Deferred income tax assets December 31, 2024 | Deferred income tax liabilities December 31, 2024 |
Property, plant, and equipment excluding right-of-use assets | 3.6 | – 6.9 | 5.8 | – 7.6 |
Right-of-use assets | 0.0 | – 7.0 | 0.0 | – 6.3 |
Intangible assets1 | 6.7 | – 15.5 | 13.6 | – 24.7 |
Defined benefit plan assets | 0.0 | – 12.6 | 0.0 | – 15.0 |
Inventories | 8.9 | – 2.1 | 8.3 | – 1.8 |
Other assets | 1.3 | – 11.7 | 0.8 | – 11.6 |
Derivative financial instruments | 1.6 | 0.0 | 0.3 | 0.0 |
Lease liabilities | 8.4 | 0.0 | 7.6 | 0.0 |
Provisions | 4.5 | – 0.2 | 2.5 | – 0.2 |
Defined benefit plan liabilities | 1.7 | – 0.3 | 2.0 | – 0.1 |
Other liabilities | 7.4 | – 4.3 | 10.6 | – 4.6 |
Tax loss carry-forwards and tax credits | 25.4 | 0.0 | 26.5 | 0.0 |
Total | 69.5 | – 60.6 | 78.0 | – 71.9 |
Offsetting | – 22.5 | 22.5 | – 32.0 | 32.0 |
Deferred income tax assets/liabilities | 47.0 | – 38.1 | 46.0 | – 39.9 |
1The comparative period (2023) has been adjusted by allocating the “Valuation adjustments on deferred tax assets” to “Intangible assets” in the amount of CHF 3.1 million.
The table below discloses tax loss carryforward by their year of expiry:
CHF million | Recognized 2023 | Non-recognized 2023 | Recognized 2024 | Non-recognized 2024 |
Less then 3 years | 0.0 | 0.0 | 2.3 | 0.0 |
In 3 to 7 years | 56.6 | 2.3 | 37.4 | 0.0 |
Thereafter | 33.4 | 71.4 | 50.9 | 96.8 |
Total at December 31 | 90.0 | 73.7 | 90.6 | 96.8 |
Significant unused tax losses for which no deferred tax asset has been recognized concern primarily countries with a tax rate between 15 and 35 percent (2023: 12 to 31 percent).
Significant accounting estimates and judgments
Assumptions in relation to income tax expenses also include interpretations of the tax regulations in countries where Rieter has business activities. The adequacy of these interpretations is assessed by tax authorities and competent courts, a process that can result in changes to income taxes at a later stage. In addition, whether a deferred income tax asset is recognized for tax losses carried forward, is based on management’s estimate of the availability of future taxable profits to offset the respective losses carried forward. In 2024 and 2023, the earthquake in Türkiye and the global economic and geopolitical uncertainties had no impact on these accounting estimates and judgments.
Material accounting policies
The expected income tax charge is calculated and accrued on the basis of taxable income for the year under review at the applicable income tax rate for each jurisdiction adjusted by the use of accumulated tax losses.
Deferred income tax assets and liabilities on temporary differences arising between the carrying amounts reported as part of the Group’s consolidated financial statements and the tax basis of assets and liabilities used for local tax purposes are calculated using the liability method. Deferred income tax assets and liabilities are determined using local tax rates that are fully or substantially enacted at the end of the reporting period and are expected to apply when the respective timing differences reverse. Deferred income tax assets and liabilities are offset to the extent that this is permitted by law. Changes in deferred income tax assets and liabilities are recognized as income tax expenses in the income statement unless they relate to items recognized directly in equity or other comprehensive income.
Deferred income tax liabilities on retained earnings of group companies are recognized only in cases where a distribution of profits is planned. Therefore, no deferred income tax liabilities on retained earnings of group companies are recognized if Rieter is able to control the timing of the reversal of the temporary difference and it is probable that retained earnings will not be distributed in the foreseeable future.
Deferred income tax assets are capitalized only to the extent that it is probable that sufficient future taxable income will be available to offset the respective temporary differences or tax losses in the foreseeable future.
Obligations in connection with uncertain tax balances are classified as income tax liabilities.
The Group is within the scope of the OECD Pillar Two model rules requiring that applicable multinational corporations pay a minimum effective corporation tax rate of 15 percent. Pillar Two rules have been enacted or substantially enacted in many jurisdictions where Rieter operates. Switzerland introduced the “Swiss domestic minimum tax rule” starting from January 1, 2024. In 2024, these new rules have not resulted in a top-up tax to the Group. The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as current tax when it is incurred. Effective from 2025, Switzerland is also introducing the Income Inclusion Rule (IIR). Based on the assessment to date, the IIR is not expected to have a material impact on the Group’s financial position in 2025.