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15 Income taxes

Income tax expense

In CHF million   2016   2015
Current income tax expense   305   296
Adjustments recognised for current tax of prior periods     (1)
Deferred tax expense   81   106
Total income tax expense recognised in income statement   386   401
Thereof Switzerland   339   387
Thereof foreign countries   47   14

In addition, the other comprehensive income includes negative current and deferred income taxes of CHF 322 million (prior year: CHF 133 million) which may be analysed as follows:

In CHF million   2016   2015
Foreign currency translation adjustments of foreign subsidiaries   (83)   51
Actuarial gains and losses from defined benefit pension plans   (238)   80
Change in fair value of cash flow hedges   (1)   (1)
Gains and losses from cash flow hedges transferred to income statement     3
Total income tax expense recognised in other comprehensive income   (322)   133

In the past, income taxes on foreign-currency related impairment losses on Group subsidiaries were recognised under other comprehensive income. As a result of restructuring in 2016, these impairment losses can no longer be asserted for tax purposes. The resultant effect on income taxes in other comprehensive income in 2016 amounts to CHF 79 million.

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   2016   2015
Income before income taxes in Switzerland   1,817   1,692
Income before income taxes foreign countries   173   71
lncome before income taxes   1,990   1,763
Applicable income tax rate   20.9%   20.9%
Income tax expense at the applicable income tax rate   416   368
   
         
Reconciliation to reported income tax expense        
Effect of share of results of associates   1   (5)
Effect of tax rate changes on deferred taxes   (2)   19
Effect of use of different income tax rates in Switzerland   (8)   2
Effect of use of different income tax rates in foreign countries   5   (7)
Effect of non-recognition of tax loss carry-forwards   6   7
Effect of recognition and offset of tax loss carry-forwards not recognised in prior years   (12)  
Effect of exclusively tax-deductible expenses and income   (26)   (23)
Effect of non-taxable income and non-deductible expenses   6   36
Effect of income tax of prior periods     4
Total income tax expense   386   401
         
Effective income tax rate   19.4%   22.7%

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   2016   2015
Current income tax liabilities at 1 January, net   125   155
Recognised in income statement   305   295
Recognised in other comprehensive income   5   23
Income taxes paid in Switzerland   (324)   (345)
Income taxes paid in foreign countries   (4)   (5)
Additions from business combinations     2
Current income tax liabilities at 31 December, net   107   125
Thereof current income tax assets   (18)   (21)
Thereof current income tax liabilities   125   146
Thereof Switzerland   105   129
Thereof foreign countries   2   (4)
Deferred tax assets and liabilities

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

  31.12.2016   31.12.2015

In CHF million
 
Assets
 
Liabilities
  Net
amount
 
Assets
 
Liabilities
  Net
amount
Property, plant and equipment   36   (568)   (532)   41   (523)   (482)
Intangible assets     (326)   (326)     (335)   (335)
Provisions   78   (76)   2   86   (59)   27
Defined benefit obligations   359     359   582     582
Tax loss carry-forwards   118     118   171     171
Other   138   (99)   39   192   (91)   101
Total tax assets (tax liabilities)   729   (1,069)   (340)   1,072   (1,008)   64
Thereof deferred tax assets           281           354
Thereof deferred tax liabilities           (621)           (290)
Thereof Switzerland           (435)           (121)
Thereof foreign countries           95           185

In 2016, deferred tax assets and liabilities have changed as follows:


In CHF million
 


Balance at
31.12.2015
 

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


Balance at
31.12.2016
Property, plant and equipment   (482)   (50)         (532)
Intangible assets   (335)   13     (5)   1   (326)
Provisions   27   (25)         2
Defined benefit obligations   582   15   (238)       359
Tax loss carry-forwards   171   (52)       (1)   118
Other   101   18   (79)     (1)   39
Total   64   (81)   (317)   (5)   (1)   (340)

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


In CHF million
 


Balance at
31.12.2014
 

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

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 2016, various subsidiaries recognised deferred tax assets on tax loss carry-forwards and other temporary differences totalling CHF 729 million (prior year: CHF 1,072 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 10 million (prior year: CHF 202 million) were recognised by subsidiaries reporting a loss in 2015 or 2016. 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   31.12.2016   31.12.2015
Expiring within 1 year    
Expiring within 1 to 2 years     1
Expiring within 2 to 3 years   4   8
Expiring within 3 to 4 years   13   12
Expiring within 4 to 5 years   13   15
Expiring within 5 to 6 years   27   22
Expiring within 6 to 7 years   29   26
No expiration   27   32
Total unrecognised tax loss carry-forwards   113   116
Thereof Switzerland   72   84
Thereof foreign countries   41   32

No deferred tax liabilities (prior year: CHF 6 million) were recognised on the undistributed earnings of subsidiaries as of 31 December 2016. Temporary differences of subsidiaries and associates, on which no deferred income taxes were recognised as of 31 December 2016, amounted to CHF 1,390 million (prior year: CHF 931 million).