1.5 Income taxes

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2020

2019

CHF million

Total

Thereof current taxes

Thereof deferred taxes

Total

Thereof current taxes

Thereof deferred taxes

 

 

 

 

 

 

 

Tax rate reconciliation

 

 

 

 

 

 

Profit before taxes

143

 

 

203

 

 

Statutory tax rate in %

14

 

 

16

 

 

 

 

 

 

 

 

 

Income tax expense at statutory tax rate

20

18

2

32

35

–3

 

 

 

 

 

 

 

Effect of income taxed at different rates 1

6

3

3

10

15

–5

Non-tax deductible expenses/tax exempted income

 

 

 

–2

–2

 

Use of unrecognized tax loss carryforwards

–4

–4

 

–3

–4

1

Effect of non-recognition of tax losses in current year

10

17

–7

4

4

 

Recognition of previously unrecognized tax loss carryforwards

–1

 

–1

 

 

 

Tax charges and credits related to prior periods, net

–1

–1

 

–1

–1

 

Non-creditable foreign withholding tax

5

5

 

5

5

 

Effect of change in tax rates

 

 

 

–5

 

–5

Other effects

–4

–1

–3

–9

–1

–8

Effective income tax expense

31

37

–6

31

51

–20

 

 

 

 

 

 

 

Effective income tax rate in %

22

 

 

15

 

 

1 GF operates worldwide and is subject to income tax in many different tax jurisdictions. The effect of income taxed at different rates may vary from year to year due to varying results of the individual Corporate Companies and changes in local tax rates.

The presentation of income taxes has been adjusted. The statutory tax rate is now used as the applicable tax rate instead of the expected income tax rate. The previous year’s figures have been adjusted accordingly.

The table shows the main elements that cause the Corporation’s effective tax rate to differ from the statutory tax rate. The Corporation’s statutory tax rate is the ordinary tax rate applicable in the canton of Schaffhausen in Switzerland, where Georg Fischer is headquartered. Georg Fischer uses the Swiss domestic tax rate as it provides more meaningful information than a weighted average tax rate. The statutory tax rate has changed to 14% (previous year: 16%).

Management assumptions and estimates

Current tax liabilities are calculated based on an interpretation of the tax regulation in place in the relevant countries. The adequacy of such an interpretation is assessed by the tax authorities in the course of the final assessment or tax audits. This can result in material changes to tax expense. Furthermore, in order to determine whether tax loss carryforwards may be capitalized, it is necessary to assess critically the probability that there will be future taxable profits which can be offset them. This assessment depends on a variety of influencing factors and developments.

The Corporation’s effective income tax rate amounts to 22% (previous year: 15%). The increase in the effective income tax rate is mainly due to the fact that the effective income tax rate in the previous year was influenced by the Swiss Corporate Tax Reform. In the previous year, the Swiss Corporate Tax Reform led to a one-time reduction in the effective income tax rate. The reform included cantonal tax rate cuts and the abolition of special cantonal tax regimes. The cantonal tax rate cuts led to a one-time deferred tax income of CHF 5 million due to the revaluation of the deferred tax positions. In addition, the abolition of the holding company status of Georg Fischer Ltd. led to a one-time deferred tax income of CHF 9 million due to the step-up of hidden reserves for tax purposes in relation to the trademark +GF+.

The unrecognized tax loss carryforwards in 2020  totaling CHF 159 million (previous year: CHF 127 million) have a potential tax relief effect of CHF 41 million (previous year: CHF 33 million), of which CHF 113 million (previous year: CHF 98 million) can be utilized for an indefinite period. CHF 4 million is to expire within one year (previous year: CHF 1 million).

As of 31 December 2020, tax loss carryforwards of CHF 51 million (previous year: CHF 19 million) were capitalized, resulting in a deferred tax asset of CHF 12 million (previous year: CHF 5 million).

Management assumptions and estimates

Current tax liabilities are calculated based on an interpretation of the tax regulation in place in the relevant countries. The adequacy of such an interpretation is assessed by the tax authorities in the course of the final assessment or tax audits. This can result in material changes to tax expense. Furthermore, in order to determine whether tax loss carryforwards may be capitalized, it is necessary to critically assess the probability of future taxable profits that can be offset. This assessment depends on a variety of influencing factors and developments.

Accounting principles

Income taxes include current and deferred taxes. Current income taxes are calculated on the taxable profit. Deferred taxes are calculated by applying the balance sheet liability method for any temporary difference between the carrying amount according to Swiss GAAP FER and the tax basis of assets and liabilities. Tax loss carryforwards are recognized only to the extent that it is probable that future taxable profits or deferred tax liabilities will be available against which they can be offset. The calculation of deferred taxes is based on the country-specific tax rates. Tax assets and liabilities are offset if they concern the same taxable entity and tax authority, and if there is an offset entitlement for current taxes. No deferred tax is provided for temporary differences on investments in subsidiaries where the timing of the reversal of the temporary difference is controlled by the Corporation and where it is probable that the temporary difference will not be reversed in the foreseeable future.

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