Annual Report 2022/23

1.6 Taxes

Income taxes

The weighted applicable tax rate results from applying each subsidiary’s statutory income tax rate to the income before taxes. Since the group operates in countries that have different tax rates, the weighted applicable tax rate may vary from year to year according to variations in income per country and changes in applicable tax rates.

CHF million	Financial year ended 30.06.2023	Financial year ended 30.06.2022 (restated) 1
Profit before taxes	142.2	74.9
Weighted applicable tax rate	24.8%	24.9%
Tax calculated at applicable tax rate	35.3	18.6
Current income taxes	48.7	49.3
Deferred income taxes	5.0	–13.2
Income taxes	53.7	36.1
Difference between applicable and effective income taxes	18.4	17.5
Impact of losses and tax loss carryforwards	–3.3	1.3
Tax-exempt income	–3.8	–2.6
Non-deductible expenses	6.3	5.2
Non-deductible goodwill amortization	14.8	19.9
Non-recoverable withholding tax expenses	3.4	2.2
Effect of change in tax rates	2.2	–0.4
Tax charges (credits) relating to prior periods, net	–0.3	–6.1
Other	–0.9	–2.0
Income taxes charged to equity	–0.7	0.2

1 Details on the restatement are disclosed in chapter changes in accounting principles and restatement of previous period (5.1).

The effective income tax rate of 37.8% (2021/22: 48.5%) is significantly impacted by the amortization of goodwill (see note changes in accounting principles and restatement of previous period (5.1)). Amortization of goodwill that is non-deductible for tax purposes results in an increase of the effective tax rate. The impact from “non-deductible goodwill amortization” is disclosed separately in the reconciliation above. Without this impact, the effective tax rate is 26.6% (2021/22: 22.9%). The lower rate in the previous year was mainly due to significant tax charges and credits of CHF 6.1 million relating to years before the financial year 2021/22.

Deferred taxes

CHF million	Financial year ended 30.06.2023	Financial year ended 30.06.2022
Balance sheet presentation of deferred income taxes
Total deferred income taxes, net	112.0	123.9
Deferred income tax assets	143.0	148.2
Deferred income tax liabilities	31.0	24.3
Expiration of tax loss carryforwards not recognized as deferred tax assets
Balance of tax loss carryforwards at end of financial year	122.4	146.0
Expiry in 1 year	2.1	2.5
Expiry in 2 to 5 years	16.1	18.7
Expiry after 5 years	8.5	13.4
No expiry	95.7	111.4

These financial statements have been prepared without recognition of deferred tax assets and liabilities nor top-up taxes related to the ‘International Tax Reform – Pillar Two’. Developments are closely monitored, and it is expected that for dormakaba the Pillar Two rules will come into effect for the first time in the financial year 2024/25.

Accounting principles

Current income taxes are based on taxable income for the current year and charged to income when incurred. Deferred income taxes are determined using the liability method, with the applicable and substantially enacted income tax rates applied on a comprehensive basis to eligible temporary differences. Deferred income tax assets arising from temporary differences are only recognized to the extent that it is probable that future taxable profit will be available, against which the temporary differences can be utilized. Deferred income taxes resulting from tax loss carryforwards applicable to future taxable income are only recognized to the extent of the available deferred tax liabilities.

Use of accounting estimates

The recoverable amount of deferred income tax assets is based on past performance and forecasts of the corresponding taxable entity over a period of several years. Deviations between actual and projected results can lead to impairment losses.