Note 21 – Taxes Audited

21.1 Income Taxes

Major Components of Tax Expenses

million CHF 2016 2015
     
Current taxes (54) (58)
Deferred tax expense relating to the origination and reversal of temporary differences (16) (7)
Deferred tax income resulting from tax rate changes (2) 1
Total (72) (64)

 

Lonza Group Ltd and the operating company Lonza Ltd are domiciled in Switzerland. The maximum rate of all income taxes on companies domiciled in Switzerland is 8% (2015: 8%) for holding companies and 22% for operating companies in the Canton of Valais (2015: 22%).

Since the Group operates across the world, it is subject to income taxes in several different tax jurisdictions. Lonza uses, as the Group’s tax rate, the ordinary tax rate for a legal entity in the Canton of Valais in Switzerland. The Group’s effective tax rate for 2016 is 19% (2015: 19%).

Capital taxes of CHF 12 million (2015: CHF 16 million) are included in “Administration and general overheads”.

Reconciliation of Tax Expense

million CHF 2016 2015
     
Profit before income taxes 373 341
     
Tax at the group rate (2016: 22 % / 2015: 22 %) 82 75
Deviation from average group tax rate 3 14
Non-deductible expenses 4 4
Tax-free earnings (17) (13)
Deferred tax effect from tax rate changes (2) 1
Changes in prior year estimates (including valuation allowances) 9 (11)
Tax on unremitted earnings (9) (13)
Effect of non-recognition of deferred tax assets 3 7
Other (1) 0
Total 72 64
     
Deferred tax expenses (charged) / credited directly to equity 0 0
Current tax expenses (charged) / credited directly to equity (2) 0

 

 

In assessing whether it is probable that future taxable profit will be available to offset these tax loss carry-forwards, management considers a portion of such benefits to be recoverable on the basis of the current situation of the company and the future economic benefits outlined in specific business plans for each relevant subsidiary.

Deferred tax liabilities have not been established for the withholding tax and other taxes that would be payable on the remittance of earnings of foreign subsidiaries, where such amounts are currently regarded as permanently reinvested. The total unremitted earnings of the Group, regarded as permanently reinvested, were CHF 543 million at 31 December 2016 (2015: CHF 451 million).

21.2 Disclosure of Tax Effects to Each Component of Other Comprehensive Income

million CHF 2016 2015
  Before-tax amount Tax (expense) benefit Net-of-tax amount Before-tax amount Tax (expense) benefit Net-of-tax amount
     
Exchange differences on translating foreign operations 4 (1) 3 (113) 0 (113)
Cash flow hedges (1) (1) (2) 7 (1) 6
Remeasurement of defined-benefit liability (37) 10 (27) (58) 8 (50)
Other comprehensive income (34) 8 (26) (164) 7 (157)