9. Taxes

in CHF m	2017	2016
Current income taxes	–96	–119
Deferred income taxes	–39	44
Total taxes	–135	–75

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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2017 in CHF m

in %

2016 in CHF m

in %

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

Income before taxes total

437

338

Expected tax expense/rate¹

–117

26.8

–55

16.3

Effect of taxes on items not tax-deductible

–66

15.1

–35

10.4

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

–5.3

–0.9

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

–10

2.3

–10

3.0

Effect of adjustments to taxes recognized in prior periods

–5.7

–13

3.8

Effect of tax exempt income

–14.2

–9.5

Effect of other items

–52

11.9

–0.9

Effective tax expense/rate

–135

30.9

–75

22.2

In 2017, the effective tax rate compared to the expected tax rate was adversely influenced by the deferred tax impact of US tax reform (reported as »Effect of other items« for an amount of CHF 45 million) and to a lower extent by the non-recognition of deferred tax asset on tax losses incurred by subsidiaries mainly in China as their recoverability was not considered probable. On the other hand, the effective tax rate was positively influenced by the utilization of previously unrecognized tax losses / tax credits in Switzerland.

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 2015	88	148	128	—	364	–108	256
Deferred tax liabilities at 31 December 2015	–173	–2	–1	–3	–179	108	–71
Net deferred tax balance at 1 January 2016	–85	146	127	–3	185	—	185
Charged/credited to income from continuing operations	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
At 1 January 2017	–7	163	111	–2	265	—	265
Charged/credited to income statement	27	–13	5	–58	–39
Total charged/credited to income statement	27	–13	5	–58	–39
Charged/credited to other comprehensive income	—	–36	—	—	–36
Effect of business combinations	–8	—	9	5	6
Exchange rate differences	11	6	–2	–9	6
Net deferred tax balance at 31 December 2017	23	120	123	–64	202	—	202
Deferred tax assets at 31 December 2017	192	131	123	108	554	–287	267
Deferred tax liabilities at 31 December 2017	–169	–11	—	–172	–352	287	–65
Net deferred tax balance at 31 December 2017	23	120	123	–64	202	—	202

Of the deferred tax assets capitalized on tax losses, CHF 68 million refer to tax losses of the US subsidiaries (2016: CHF 68 million), CHF 9 million to tax losses of the Spanish subsidiaries (2016: CHF 8 million), CHF 6 million to tax losses of the Canadian subsidiaries (2016: CHF 5 million) and CHF 6 million to tax losses of the Italian subsidiaries (2016: CHF 6 million). Clariant considers it 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 2 193 million at the end of 2017 (2016: CHF 2 317 million).

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 France (with a tax rate of 33.3%), in Switzerland (with a weighted average tax rate of 20.7%), in China (with a tax rate of 25%) and in Luxembourg (with a tax rate of 27.3%). 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	31.12.2017	31.12.2016
Expiry by:
2017		56
2018	27	25
2019	18	32
2020	31	47
2020	33	—
after 2021 (2016: after 2020)	308	291
Total	417	451

Tax credits amounting to CHF 16 million were recognized in 2017. They expire in and after 2022.

Temporary differences on which no deferred tax was recognized amount to CHF 1 005 million in 2017 (2016: CHF 1 038 million).

Integrated Report 2017

9. Taxes

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