Income taxes

Income tax expense


In CHF million
 
2013
  2012
restated
Current income tax expense   322   318
Adjustments recognised for current tax of prior periods   (20)   19
Deferred tax expense   32   81
Total income tax expense recognised in income statement   334   418
Thereof Switzerland   354   431
Thereof foreign countries   (20)   (13)

In addition, other comprehensive income reflects income taxes of CHF 184 million (prior year: gain of CHF 157 million) which may be analysed as follows:


In CHF million
 
2013
  2012
restated
Foreign currency translation adjustments of foreign subsidiaries   (14)   6
Actuarial gains and losses from defined benefit pension plans   (169)   151
Change in fair value of cash flow hedges     1
Gains and losses from cash flow hedges transferred to income statement   (1)   (1)
Total income tax expense recognised in other comprehensive income   (184)   157
Thereof Switzerland   (184)   157
Thereof foreign countries    

In prior years, valuation allowances on investments were recognised in the separate financial statements of Group subsidiaries and were deducted for tax purposes. The 2013 impairment tests led to valuation results in excess of the net carrying amount of investments. In order for these results to be reflected in taxable profits, these recoveries in value must be sustainable. This is not the case shortly after recognition of an impairment loss as a longer period is required in order that a recovery in value can be corroborated. For this reason, no tax effects were recognised on the difference between the valuation results and the net carrying amount of the investments in the separate financial statements for 2013. Should the recoveries in value be classified as sustainable at some point in the future, this could result in a cash outflow of up to CHF 260 million.

Analysis of income taxes

The applicable income tax rate for the purposes of the following analysis of income tax expense is the weighted average income tax rate calculated on the basis of the operating companies of the Group in Switzerland. The applicable income tax rate amounts to an unchanged 20.6%.


In CHF million
 
2013
  2012
restated
Income before income taxes in Switzerland   2,149   2,364
Income before income taxes foreign countries   (120)   (131)
lncome before income taxes   2,029   2,233
Applicable income tax rate   20.6%   20.6%
Income tax expense at the applicable income tax rate   418   460
   
         
Reconciliation to reported income tax expense        
Effect of share of results of associates   (6)   (7)
Effect of tax rate changes on deferred taxes   (2)   1
Effect of use of different income tax rates in Switzerland   (7)   (7)
Effect of use of different income tax rates in foreign countries   (12)   (16)
Effect of non-recognition of tax loss carry-forwards   9   17
Effect of recognition and offset of tax loss carry-forwards not recognised in prior years   (47)   (21)
Effect of deferred tax assets written off   4  
Effect of impairment losses on goodwill   5  
Effect of exclusively tax-deductible expenses and income   (20)   (27)
Effect of non-taxable income and non-deductible expenses   8   (1)
Effect of income tax of prior periods   (16)   19
Total income tax expense   334   418
         
Effective income tax rate   16.5%   18.7%

In 2012 and 2013, previously unrecognised tax loss carry-forwards arising from mergers of Group companies were claimed for tax purposes. The positive impact on income-tax expense in 2013 amounted to CHF 21 million (prior year: CHF 19 million).

Deferred tax assets and liabilities

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

In CHF million   2013   2012
Current income (tax assets) tax liabilities at 1 January, net   134   (8)
Recognised in income statement   302   337
Recognised in other comprehensive income   3  
Income taxes paid in Switzerland   (307)   (145)
Income taxes paid in foreign countries   29   (45)
Additions from acquisition of subsidiaries   1  
Interest on arrears     (5)
Current income tax liabilities (income tax assets) at 31 December, net   162   134
Thereof current income tax assets   (22)   (55)
Thereof current income tax liabilities   184   189
Thereof Switzerland   168   163
Thereof foreign country   (6)   (29)

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

 
31.12.2013
  31.12.2012
restated

In CHF million
 
Assets
 
Liabilities
  Net
amount
 
Assets
 
Liabilities
  Net
amount
Trade and other receivables   22   (23)   (1)   43   (22)   21
Property, plant and equipment   41   (342)   (301)   45   (288)   (243)
Intangible assets     (364)   (364)     (380)   (380)
Defined benefit obligations   268     268   419     419
Tax loss carry-forwards   203     203   165     165
Other   85   (67)   18   100   (33)   67
Total tax assets (tax liabilities)   619   (796)   (177)   772   (723)   49
Thereof deferred tax assets           279           285
Thereof deferred tax liabilities           (456)           (236)
Thereof Switzerland           (328)           (46)
Thereof foreign countries           151           95

Deferred tax assets and liabilities have changed as follows:


In CHF million
 

Balance at
31.12.2012
restated
 

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


Balance at
31.12.2013
Trade and other receivables   21   (22)         (1)
Property, plant and equipment   (243)   (57)     (4)   3   (301)
Intangible assets   (380)   32     (13)   (3)   (364)
Defined benefit obligations   419   16   (169)   2     268
Tax loss carry-forwards   165   36       2   203
Other   67   (37)   (12)       18
Total   49   (32)   (181)   (15)   2   (177)

In CHF million
 

Balance at
31.12.2011
restated
 

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

Balance at
31.12.2012
restated
Trade and other receivables   31   (10)         21
Property, plant and equipment   (167)   (76)         (243)
Intangible assets   (407)   27     (2)   2   (380)
Defined benefit obligations   301   (32)   151     (1)   419
Tax loss carry-forwards   139   27       (1)   165
Other   79   (17)   6     (1)   67
Total   (24)   (81)   157   (2)   (1)   49

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 2013, various subsidiaries recognised deferred tax assets on tax loss carry-forwards and other temporary differences totalling CHF 619 million (prior year: CHF 772 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 247 million (prior year: CHF 301 million) were recognised by subsidiaries reporting a loss in 2012 or 2013. 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 and other temporary differences for which no deferred tax assets were recorded, expire as follows:

In CHF million   31.12.2013   31.12.2012
Expiring within 1 year   1   2
Expiring within 1 to 2 years   1   9
Expiring within 2 to 3 years     38
Expiring within 3 to 4 years     5
Expiring within 4 to 5 years   8   14
Expiring within 5 to 6 years   8   27
Expiring within 6 to 7 years   23   43
No expiration   134   220
Total unrecognised tax loss carry-forwards   175   358
Thereof Switzerland   23   125
Thereof foreign country   152   233

Deferred tax liabilities of CHF 6 million (prior year: CHF none) were recognised on the undistributed earnings of subsidiaries as of 31 December 2013. Temporary differences of subsidiary and associated companies, on which no deferred income taxes were recognised as of 31 December 2013, amounted to CHF 1,264 million (prior year: CHF 534 million).