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

In 2019 the recorded tax expense was adversely impacted by the non-recognition of deferred tax assets on tax losses as their recoverability was not considered probable, the US minimum tax BEAT and further one-time events. These effects and the fact that no further tax assets were capitalized in France and Switzerland as in the prior year let to a higher effective tax rate from continuing operations before the provision for the EU-investigation.

On May 19, 2019 the Swiss public voted to adopt the Federal Act on Tax Reform and AHV Financing (»TRAF«) confirming the reform of corporate taxation in Switzerland. The tax reform brings the replacement of certain preferential tax regimes with a new set of internationally accepted measures. The legislative changes align with the broad reduction of the cantonal corporate taxes. As at January 1, 2020 new regulations concerning Group taxation have become effective. The most relevant changes for the Group include a gradual decrease in the Basel-Land effective tax rate from 20.7% to 13.45% by 2025 and the abolishment of special tax regimes. The effective tax rate for Clariant Ltd will increase from 7.8% to 13.45% over that period. Based on these changes the Group has remeasured its deferred tax positions on the balance sheet as at December 31, 2019. The cumulative impact is a net increase in deferred tax assets of CHF 8 million, of which CHF 7 million are related to actuarial gains/losses to Swiss pension plans and were recorded in other comprehensive income. The remaining adjustment of CHF 1 million was recorded in the income statement. The deferred tax effects recorded in the 2019 consolidated financial statement do not impact current tax payments.

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

Of the deferred tax assets capitalized on tax losses, CHF 39 million refer to tax losses of the US subsidiaries (2018: CHF 53 million), CHF 5 million to tax losses of the Spanish subsidiaries (2018: CHF 7 million), CHF 7 million to tax losses of the Canadian subsidiaries (2018: CHF 6 million) and CHF 10 million to tax losses of the Indian subsidiaries (2018: CHF 10 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 2 663 million at the end of 2019 (2018: CHF 2 559 million).

The change compared to the prior year is primarily 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 France (with a tax rate of 31%) and in China (with a tax rate of 25%). At present their recoverability is not considered probable.

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

Tax credits amounting to CHF 7 million were recognized in 2019. They expire in and after 2025.

Temporary differences on which no deferred tax was recognized amount to CHF 710 million in 2019 (2018: CHF 672 million).