9. Taxes

in CHF m	2016	2015
Current income taxes	–119	–76
Deferred income taxes	44	2
Total taxes	–75	–74
Thereof reported under discontinued operations	—	1
Total continuing operations	–75	–73

The main elements contributing to the difference between the Group’s overall expected tax expense/rate and the effective tax expense/rate are:

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2016 in CHF m

in %

2015 in CHF m

in %

¹	Calculated based on the income before tax of each subsidiary (weighted average).

Income before taxes from continuing operations

338

300

Income before taxes from discontinued operations

—

Income before taxes total

338

313

Expected tax expense/rate¹

–55

16.3

–62

19.8

Effect of taxes on items not tax-deductible

–35

10.4

–24

7.7

Effect of utilization and changes in recognition of tax losses and tax credits

–0.9

–4.2

Effect of tax losses and tax credits of current year not recognized

–10

3.0

–8

2.6

Effect of adjustments to taxes recognized in prior periods

–13

3.8

–2

0.6

Effect of tax-exempt income

–9.5

–4.5

Effect of other items

–0.9

–5

1.6

Effective tax expense/rate

–75

22.2

–74

23.6

Thereof reported under discontinued operations

—

–0.3

Effective tax expense/rate continuing operations

–75

22.2

–73

23.3

In 2016, the effective tax rate compared to the expected tax rate was adversely impacted by the non-recognition of deferred tax asset on tax losses incurred by subsidiaries mainly in China and Canada and more expenses being considered as not tax deductible due to changes in legislation. On the other hand, the effective tax rate was positively influenced by the utilization of previously unrecognized tax losses/tax credits by subsidiaries in particular in Switzerland and newly recognized tax losses/tax credits in the United States.

The movement of the net deferred income tax balance is as follows:

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in CHF m	PPE and intangible assets	Retirement benefit obligations	Tax losses and tax credits	Other accruals and provisions	Total	Thereof offset within the same jurisdiction	Total
Deferred tax assets at 31 December 2014	50	173	135	112	470	–199	271
Deferred tax liabilities at 31 December 2014	–253	—	—	–18	–271	199	–72
Net deferred tax balance at 1 January 2015	–203	173	135	94	199	—	199
Charged/credited to income from continuing operations	101	–11	–3	–86	1
Effect of disposals	1	—	—	—	1
Total charged/credited to income statement	102	–11	–3	–86	2
Charged/credited to other comprehensive income	—	–6	—	—	–6
Exchange rate differences	16	–10	–5	–11	–10
Net deferred tax balance at 31 December 2015	–85	146	127	–3	185	—	185
Deferred tax assets at 31 December 2015	88	148	128	—	364	–108	256
Deferred tax liabilities at 31 December 2015	–173	–2	–1	–3	–179	108	–71
At 1 January 2016	–85	146	127	–3	185	—	185
Charged/credited to income statement	77	–2	–16	–5	54
Effect of disposals	2	–8	—	–4	–10
Total charged/credited to income statement	79	–10	–16	–9	44
Charged/credited to other comprehensive income	—	26	—	—	26
Effect of business combinations	—	—	—	1	1
Exchange rate differences	–1	1	—	9	9
Net deferred tax balance at 31 December 2016	–7	163	111	–2	265	—	265
Deferred tax assets at 31 December 2016	156	163	111	6	436	–138	298
Deferred tax liabilities at 31 December 2016	–163	—		–8	–171	138	–33
Net deferred tax balance at 31 December 2016	–7	163	111	–2	265	—	265

Of the deferred tax assets capitalized on tax losses, CHF 68 million refer to tax losses of the US subsidiaries (2015: CHF 76 million), CHF 8 million to tax losses of the Spanish subsidiaries (2015: CHF 10 million), CHF 6 million to tax losses of the Italian subsidiaries (2015: CHF 8 million). The capitalized tax losses of the Swiss subsidiaries (2015: CHF 4 million) were utilized in 2016. Clariant considers it is highly probable that these tax losses can be recovered.

Deferred income tax liabilities have not been established for withholding tax and other taxes that would be payable on the unremitted earnings of certain foreign subsidiaries, as such amounts are currently regarded as permanently reinvested. These unremitted earnings totaled CHF 2 317 million at the end of 2016 (2015: CHF 1 734 million). The change compared to the prior year is essentially the result of Group-internal transactions.

The tax losses on which no deferred tax assets are recognized are reviewed for recoverability at each balance sheet date. The largest part of these tax losses arose in Switzerland (with a weighted average tax rate of 20.7%), in France (with a tax rate of 33.3%), in China (with a tax rate of 25%) and in Luxembourg (with a tax rate of 27.1%). At present their recoverability is not considered probable.

Tax losses on which no deferred tax assets were recognized are as follows:

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in CHF m	31.12.2016	31.12.2015
Expiry by:
2016	—	71
2017	56	60
2018	25	22
2019	32	32
2020	47	—
after 2020 (2015: after 2019)	291	260
Total	451	445

Tax credits amounting to CHF 16 million were entirely recognized in 2016. They expire in and after 2021.

Temporary differences on which no deferred tax was recognized amount to CHF 1 038 million in 2016 (2015: CHF 953 million).

Integrated Report

Sustainability Report

Integrated Report 2016

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