25 Income Taxes

Income tax expense
In CHF million  
  2010 2009
Current income tax expense
  101 128
Deferred income tax expense
  –65 –25
Total income tax expense
  36 103


The expected weighted-average tax rate for the continuing operations of the Group was 26.7% in 2010 (2009: 30.7%). This rate was derived by obtaining a weighted average of the expected income tax rates in the various jurisdictions in which the Group operates. The change of the weighted-average tax rate is due to the geographical allocation of the profits and the different tax rates in these jurisdictions. The actual income tax expense differs from the expected amount as follows:

Reconciliation of Income Tax Expense
In CHF million  
  2010 2009
 
Profit before income tax
  596 427
 
Income tax calculated using the expected weighted-average tax rate
  159 131
Increase/reduction in taxes resulting from
 
lower taxed income
  –277 –188
non-deductible expenses
  104 142
other income taxes (incl. withholding taxes)
  15 43
change in unrecognised tax losses
  40 38
adjustments for current tax of prior periods
  17 17
changes in tax rates
  0 0
intercompany effects
  –21 –80
other
  –1 0
Income tax expense
  36 103


In 2010, a positive one-off income tax effect amounting to CHF 87 million was realised due to a change in the French tax legislation. The intercompany effects in 2010 were based on tax grouping and intragroup income and expense.

In 2009, other income taxes (incl. withholding taxes) of CHF 43 million were mainly based on a transaction at a lower income tax rate compared to the ordinary income tax rate. Positive intercompany effects of CHF 80 million in 2009 were primarily due to tax group effects and to intragroup income and expense.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same tax authority.

Deferred income tax assets and liabilities
In CHF million  
  Deferred tax assets Deferred tax liabilities
  31.12.2010 31.12.2009 31.12.2010 31.12.2009
Financial assets
  149 192 192 109
Investment property
  455 429
Intangible assets
  34 39 308 354
Property and equipment
  28 29 3 1
Financial liabilities
  13 8 19 23
Insurance liabilities
  55 37 60 56
Employee benefits
  23 32 55 56
Deferred income
  2 0 3 5
Other
  137 45 31 66
Tax losses
  14 41
Deferred income tax assets/liabilities
  455 423 1 126 1 099
Offset
  –305 –343 –305 –343
Total deferred income tax assets/liabilities
  150 80 821 756


The increase in the deferred tax asset relating to “Other” in 2010 is primarily due to a change in the French tax legislation.

The movements in net deferred income tax assets/liabilities during the period were as follows:

In CHF million  
 

Balance as at
1 January


Recognised
in income


Recognised
in equity

Business
combinations
and disposals
Foreign
currency
translation
differences


Balance as at
end of period
 
Movements by type of temporary difference during the year 2010
 
Financial assets
  83 –49 –70 0 –7 –43
Investment property
  –429 –33 0 7 –455
Intangible assets
  –315 13 8 0 20 –274
Property and equipment
  28 0 –3 25
Financial liabilities
  –15 7 0 2 –6
Insurance liabilities
  –19 19 –1 –4 –5
Employee benefits
  –24 –5 –3 –32
Deferred income
  –5 3 0 1 –1
Other
  –21 133 0 –6 106
Tax losses
  41 –23 –4 14
Net deferred income tax assets/liabilities
  –676 65 –63 0 3 –671


Movements by type of temporary difference during the year 2009
 
Financial assets
  158 86 –161 0 0 83
Investment property
  –430 1 0 0 –429
Intangible assets
  –339 13 11 –1 1 –315
Property and equipment
  30 –2 0 28
Financial liabilities
  19 –34 0 –15
Insurance liabilities
  3 –22 0 0 –19
Employee benefits
  –12 –12 0 –24
Deferred income
  2 –7 0 –5
Other
  4 –26 0 0 1 –21
Tax losses
  14 28 –1 41
Net deferred income tax assets/liabilities
  –551 25 –150 –1 1 –676


Deferred tax liabilities have not been recognised on the aggregate amount of temporary differences with consolidated investments in subsidiaries to the extent the Group considers such undistributed earnings as being indefinitely reinvested and does not expect to repatriate these earnings in the foreseeable future. The amount of such temporary differences was approximately CHF 1.7 billion as at 31 December 2010 (2009: CHF 1.7 billion). If such earnings are ever repatriated, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.

Deferred tax assets are recognised for tax-loss carryforwards only to the extent that realisation of the related tax benefit is probable. Swiss tax assets are calculated in accordance with cantonal and municipal tax legislation. The uncertainty of the utilisation of tax losses is taken into account in establishing the valuation allowance. For the following tax-loss carryforwards, which will expire as follows, no deferred tax asset has been recognised:

Unrecognised tax losses
Amounts in CHF million  
  Tax losses Tax rate
  31.12.2010 31.12.2009 31.12.2010 31.12.2009
2011
  6 19 10.5% 9.5%
2012
  2 24 13.0% 13.2%
2013
  7 40 8.7% 14.7%
Thereafter
  1 136 1 055 13.6% 23.1%
Total
  1 151 1 138 n/a n/a


 
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