Annual Report 2023/24

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 30.06.2024	Financial year ended 30.06.2023
Profit before taxes	134.1	142.2
Weighted applicable tax rate	22.9%	24.8%
Tax calculated at applicable tax rate	30.7	35.3
Current income taxes	55.4	48.7
Deferred income taxes	–3.5	5.0
Income taxes	51.9	53.7
Difference between applicable and effective income taxes	21.2	18.4
Impact of losses and tax loss carryforwards	9.7	–3.3
Tax-exempt income	–2.8	–3.8
Non-deductible expenses	7.1	6.3
Non-taxable/non-deductible divestments/goodwill amortization	9.5	14.8
Non-recoverable withholding tax expenses	6.0	3.4
Effect of change in tax rates	–0.1	2.2
Tax charges (credits) relating to prior periods, net	–2.3	–0.3
Other	–5.9	–0.9
Income taxes charged to equity	1.4	–0.7

The effective income tax rate of 38.7% (2022/23: 37.8%) is impacted by divestments and the amortization of goodwill. The amortization of goodwill, which is non-deductible for tax purposes, leads to an increase of the effective tax rate, whereas the profit from the sale of investments, being non-taxable, reduces the effective tax rate. This impact is disclosed separately in the reconciliation above (divestments/non-deductible goodwill amortization). Without this impact, the effective tax rate is 29.3% (2022/23: 26.6%).

In 2023/24, the tax rate was further affected by tax losses resulting from restructuring costs. Consistent with our accounting policy, no tax benefit has been recognized for these losses. Excluding this negative impact of CHF 8.8 million, the tax rate would have been 24.5% (2022/23: 26.6%). A corresponding tax benefit can be anticipated in future years when the tax losses are utilized.

The variance in “Other” compared to the previous year is attributed to a change in tax provisions.

Deferred taxes

CHF million	Financial year ended 30.06.2024	Financial year ended 30.06.2023
Balance sheet presentation of deferred income taxes
Total deferred income taxes, net	115.2	112.0
Deferred income tax assets	137.1	143.0
Deferred income tax liabilities	21.9	31.0
Expiration of tax loss carryforwards not recognized as deferred tax assets
Balance of tax loss carryforwards at end of financial year	147.9	122.4
Expiry in 1 year	5.8	2.1
Expiry in 2 to 5 years	12.1	16.1
Expiry after 5 years	9.9	8.5
No expiry	120.1	95.7

The unrecognized tax loss carryforwards of CHF 147.9 million (2022/23: CHF 122.4 million) have the potential to generate tax relief of CHF 36.0 million (previous year: CHF 28.1 million). The increase of CHF 25.5 million in unrecognized tax loss carryforwards is primarily attributable to restructuring costs, which led to tax losses in some jurisdictions. Over the medium term, it is anticipated that up to CHF 10.4 million (2022/23: CHF 2.7 million) of the CHF 36.0 million potential tax relief may be realized.

In December 2021, the OECD published the Pillar Two model rules to introduce a global minimum corporate income tax of 15% for multinational companies with consolidated sales of more than EUR 750 million. Meanwhile, Pillar Two legislation has been enacted or substantially enacted in many jurisdictions in which dormakaba operates. The legislation will be effective for dormakaba’s financial year beginning 1 July 2024. dormakaba performed an assessment of the potential exposure to Pillar Two income taxes. The application of the Pillar Two model rules would not have had a material impact on the financial results of 2023/24. dormakaba continues to monitor the development of the Pillar Two model rules and continually assesses the impact thereof on dormakaba.

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. No deferred income tax assets and liabilities related to the OECD Pillar Two global minimum tax are recognized. 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.