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15 Income taxes

Income tax expense

In CHF million   2015   2014
Current income tax expense   296   373
Adjustments recognised for current tax of prior periods   (1)   5
Deferred tax expense   106   4
Total income tax expense recognised in income statement   401   382
Thereof Switzerland   387   412
Thereof foreign countries   14   (30)

In addition, the other comprehensive income includes positive income taxes of CHF 133 million (prior year: CHF 250 million) which may be analysed as follows:


In CHF million
 
2015
  2014
restated
Foreign currency translation adjustments of foreign subsidiaries   51   15
Actuarial gains and losses from defined benefit pension plans   80   238
Change in fair value of cash flow hedges   (1)   (2)
Gains and losses from cash flow hedges transferred to income statement   3   (1)
Total income tax expense recognised in other comprehensive income   133   250

Analysis of income taxes

The applicable income tax rate which serves to prepare the following analysis of income tax expense is the weighted average income tax rate calculated on the basis of the Group’s operating subsidiaries in Switzerland. The applicable income tax rate remains unchanged from the prior year at 20.9%.

In CHF million   2015   2014
Income before income taxes in Switzerland   1,692   2,206
Income before income taxes foreign countries   71   (118)
lncome before income taxes   1,763   2,088
Applicable income tax rate   20.9%   20.9%
Income tax expense at the applicable income tax rate   368   436
   
         
Reconciliation to reported income tax expense        
Effect of share of results of associates   (5)   (5)
Effect of tax rate changes on deferred taxes   19   (21)
Effect of use of different income tax rates in Switzerland   2   (2)
Effect of use of different income tax rates in foreign countries   (7)   (10)
Effect of non-recognition of tax loss carry-forwards   7   9
Effect of recognition and offset of tax loss carry-forwards not recognised in prior years     (2)
Effect of exclusively tax-deductible expenses and income   (23)   (16)
Effect of non-taxable income and non-deductible expenses   36   (12)
Effect of income tax of prior periods   4   5
Total income tax expense   401   382
         
Effective income tax rate   22.7%   18.3%

Income tax assets and liabilities

Current income tax assets and liabilities

Movements in current-tax assets and liabilities are to be analysed as follows:

In CHF million   2015   2014
Current income tax liabilities at 1 January, net   155   162
Recognised in income statement   295   378
Recognised in other comprehensive income   23   1
Income taxes paid in Switzerland   (345)   (377)
Income taxes paid in foreign countries   (5)   (9)
Additions from business combinations   2  
Current income tax liabilities at 31 December, net   125   155
Thereof current income tax assets   (21)   (17)
Thereof current income tax liabilities   146   172
Thereof Switzerland   129   159
Thereof foreign countries   (4)   (4)
Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities are to be analysed as follows:

 
31.12.2015
  31.12.2014
restated

In CHF million
 
Assets
 
Liabilities
  Net
amount
 
Assets
 
Liabilities
  Net
amount
Property, plant and equipment   41   (523)   (482)   47   (467)   (420)
Intangible assets     (335)   (335)     (341)   (341)
Provisions   86   (59)   27   79   (4)   75
Defined benefit obligations   582     582   508     508
Tax loss carry-forwards   171     171   218     218
Other   192   (91)   101   98   (92)   6
Total tax assets (tax liabilities)   1,072   (1,008)   64   950   (904)   46
Thereof deferred tax assets           354           417
Thereof deferred tax liabilities           (290)           (371)
Thereof Switzerland           (121)           (91)
Thereof foreign countries           185           137

In 2015, deferred tax assets and liabilities have changed as follows:


In CHF million
 

Balance at
31.12.2014,
restated
 

Recognised
in income
statement
  Recognised
in other
compre-
hensive
income
 
Change
in scope
of consoli-
dation
 
Foreign
currency
translation
adjustments
 


Balance at
31.12.2015
Property, plant and equipment   (420)   (59)       (3)   (482)
Intangible assets   (341)   17     (20)   9   (335)
Provisions   75   (45)     (2)   (1)   27
Defined benefit obligations   508   (9)   80   4   (1)   582
Tax loss carry-forwards   218   (31)     3   (19)   171
Other   6   21   76   1   (3)   101
Total   46   (106)   156   (14)   (18)   64

In 2014, deferred tax assets and liabilities have changed as follows:


In CHF million
 


Balance at
31.12.2013
 

Recognised
in income
statement
  Recognised
in other
compre-
hensive
income
 
Change
in scope
of consoli-
dation
 
Foreign
currency
translation
adjustments
 

Balance at
31.12.2014,
restated
Property, plant and equipment   (301)   (119)         (420)
Intangible assets   (364)   35     (12)     (341)
Provisions   10   65         75
Defined benefit obligations   268     239   1     508
Tax loss carry-forwards   203   16     2   (3)   218
Other   7   (1)   12   (12)     6
Total   (177)   (4)   251   (21)   (3)   46

Deferred tax assets relating to unused tax loss carry-forwards and to deductible temporary differences are recognised if it is probable that they can be offset against future taxable profits or existing temporary differences. At as 31 December 2015, various subsidiaries recognised deferred tax assets on tax loss carry-forwards and other temporary differences totalling CHF 1,072 million (prior year: CHF 950 million) since it was foreseeable that tax loss carry-forwards could be offset against future taxable profits. Of this amount, tax loss carry-forwards and other temporary differences of CHF 202 million (prior year: CHF 237 million) were recognised by subsidiaries reporting a loss in 2014 or 2015. On the basis of the approved business plans of these subsidiaries, Swisscom considers it probable that the tax loss carry-forwards and temporary differences can be offset against future taxable profits.

Tax loss carry-forwards for which no deferred tax assets were recognised, expire as follows:

In CHF million   31.12.2015   31.12.2014
Expiring within 1 year     1
Expiring within 1 to 2 years   1   2
Expiring within 2 to 3 years   8   2
Expiring within 3 to 4 years   12   8
Expiring within 4 to 5 years   15   14
Expiring within 5 to 6 years   22   29
Expiring within 6 to 7 years   26   23
No expiration   32   115
Total unrecognised tax loss carry-forwards   116   194
Thereof Switzerland   84   62
Thereof foreign countries   32   132

Deferred tax liabilities of CHF 6 million (prior year: none) were recognised on the undistributed earnings of subsidiaries as of 31 December 2015. Temporary differences of subsidiaries and associates, on which no deferred income taxes were recognised as of 31 December 2015, amounted to CHF 931 million (prior year: CHF 779 million).