8.1Income taxes

The following deferred income tax effects were recognized in other comprehensive income:

The reconciliation of expected and actual income taxes is as follows:

The expected weighted average tax rate increased by 8.2 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:

Deferred income tax assets and liabilities result from the following balance sheet items:

The utilization of deferred tax assets on unused tax losses and unused tax credits is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences. Some of the subsidiaries that have recognized deferred tax assets in this category have also suffered losses in the current and/or preceding periods in the tax jurisdictions to which the deferred tax assets relate. Management analyzed estimated future taxable profits and considers it probable that future taxable profit will be available in the next five years against which these tax losses and tax credits can be recognized.

Deferred tax liabilities have not been recognized for withholding tax and other taxes that would be payable on the remittance of earnings of subsidiaries, where such amounts are currently regarded as permanently reinvested. The total unremitted earnings of the Group as of December 31, 2025 amounted to CHF 351.2 million (December 31, 2024: CHF 395.5 million).

The table below discloses tax loss carryforward by their year of expiry:

Significant unused tax losses, for which no deferred tax asset has been recognized, primarily concern countries with a tax rate between 15 and 31 percent (2024: 15 to 35 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.

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 in many jurisdictions where Rieter operates. Switzerland introduced the “Swiss domestic minimum tax rule” starting from January 1, 2024. Effective from 2025, Switzerland has also introduced the Income Inclusion Rule (IIR). In 2025, 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.