Gschäftsbericht 2018

100 | Galenica financial statements 2018 Finance Notes to the consolidated financial statements of the Galenica Group 11. Income taxes Accounting principles The expected current income tax charge is calculated and accrued on the basis of taxable profit for the current year and is recognised in profit or loss unless the underlying transaction is recognised outside profit or loss. Deferred taxes are taxes on temporary differences between the value of assets and liabilities in the tax accounts and the carrying amounts included in Galenica’s consolidated financial statements. Deferred taxes are calculated using the liability method on the basis of enacted or substantively enacted tax rates expected to apply when the asset is realised or the liability is settled. Tax effects from losses carried forward and other deductible temporary differences are only capitalised when it is probable that they will be realised in the future. Changes in deferred tax assets and deferred tax liabilities are recognised in profit or loss except for deferred taxes on transactions that are recognised directly in comprehensive income or equity. Deferred tax liabilities are recorded for all taxable temporary differences associated with investments in subsidiaries, except Galenica is able to control the timing of the distribution and no dividend distribution is planned or likely to occur in the foreseeable future. Deferred tax assets, including tax loss carryforwards and expected tax credits, are only taken into account if it is probable that future profits will be available against which the underlying assets can be applied for tax purposes. in thousand CHF 2018 2017 Current income taxes 16,647 13,315 Income taxes of prior periods 82 (3) Deferred income taxes (53,484) 7,734 Income taxes (36,755) 21,046 Tax reconciliation in thousand CHF 2018 2017 Earnings before taxes (EBT) 110,909 139,912 Weighted income tax rate in % of EBT 20.0% 20.5% Expected income taxes 22,143 28,654 Effects of income that is taxable at a lower rate or tax-free (443) (1,199) Effects of changes in tax rates (158) (4,350) Effects of unrecognised losses in the current year — 51 Release of deferred tax liabilities on investments (56,234) — Realisation of unrecognised tax losses of prior periods (17) (154) Items from prior periods and other items (2,046) (1,956) Effective income taxes (36,755) 21,046 Effective income tax rate in % of EBT (33.1%) 15.0% In connection with an internal restructuring of group companies (write-downs, disposals and mergers) in 2016, significant deferred tax liabilities on outside basis differences were recorded as of 31 December 2016. The deferred tax liabilities were largely offset by deferred tax assets recorded on tax losses generated by the internal restructuring. The final tax assess- ments for the fiscal year 2016 of the companies involved were received in late August 2018. As a consequence of these final assessments, deferred tax liabilities on outside basis differences in an amount of CHF 56.2 million have been released. The deferred tax assets are released as the tax losses are utilised. The effective income tax expense would have been 17.6% of EBT without this effect. The weighted income tax rate reflects the weighted average of the tax rates across the Swiss cantons in which Galenica is active. The composition of Galenica’s taxable income and changes in local tax rates cause the tax rate to vary from year to year. In 2017, the effects of changes in tax rates is a combination of lower tax rates in certain Cantons, but also of a different mix of profits taxable in those Cantons where Galenica is represented with wholesale distribution centers and retail pharmacies.