25 Income Taxes

Income tax expense
In CHF million  
  2012 2011
Current income tax expense
  145 18
Deferred income tax expense
  –9 –39
Total income tax expense
  137 –21


The expected weighted-average tax rate for the Group in 2012 before impairment losses on the intangible assets relating to the “AWD” segment was 26.1% and after these impairment losses 10.9% (2011: 26.5%). 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  
  2012 2011
 
Profit before income tax
  229 585
 
Income tax calculated using the expected weighted-average tax rate
  25 155
Increase/reduction in taxes resulting from
 
lower taxed income
  –141 –169
non-deductible expenses
  239 112
other income taxes (incl. withholding taxes)
  6 20
change in unrecognised tax losses
  10 28
adjustments for current tax of prior periods
  20 –96
changes in tax rates
  0 –41
intercompany effects
  –24 –26
other
  2 –4
Income tax expense
  137 –21


In 2012, non-deductible expenses include CHF 123 million relating to the impairment loss on the “AWD” goodwill.

In 2011, the Swiss Life Group realised a tax benefit of CHF 90 million due to the final assessment of the disposal of business activities in prior periods.

In 2011, a change in the tax rate in Switzerland led to a positive income tax effect of CHF 41 million.

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
  31.12.2012 31.12.2011 31.12.2012 31.12.2011
Financial assets
  195 250 879 552
Investment property
  2 1 520 496
Intangible assets
  48 56 183 279
Property and equipment
  17 25 1 3
Financial liabilities
  19 15 8 11
Insurance liabilities
  51 56 111 62
Employee benefits
  24 22 58 53
Deferred income
  2 2 1 3
Other
  61 54 38 22
Tax losses
  9 9
Deferred income tax assets/liabilities
  426 490 1 799 1 481
Offset
  –341 –337 –341 –337
Total deferred income tax assets/liabilities
  85 153 1 458 1 144


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 profit or loss
Recognised
in other
comprehensive
income


Acquisitions
and disposals
Foreign
currency
translation
differences


Balance as at
end of period
 
Movements by type of temporary difference during the year 2012
 
Financial assets
  –302 0 –381 –1 –684
Investment property
  –495 –15 –8 0 –518
Intangible assets
  –223 93 –6 1 –135
Property and equipment
  22 –7 0 16
Financial liabilities
  4 11 –3 0 11
Insurance liabilities
  –6 –55 1 0 –60
Employee benefits
  –31 –4 0 0 –34
Deferred income
  –1 2 0 1
Other
  32 –15 7 0 23
Tax losses
  9 –1 0 9
Net deferred income tax assets/liabilities
  –991 9 –390 0 0 –1 373


Movements by type of temporary difference during the year 2011
 
Financial assets
  55 21 –372 –2 –4 –302
Investment property
  –455 –26 –2 –13 1 –495
Intangible assets
  –274 21 28 –1 3 –223
Property and equipment
  25 –3 0 0 22
Financial liabilities
  –6 7 3 0 0 4
Insurance liabilities
  –5 0 0 –1 –6
Employee benefits
  –32 1 0 0 –31
Deferred income
  –1 0 0 –1
Other
  8 23 0 1 0 32
Tax losses
  14 –5 0 9
Net deferred income tax assets/liabilities
  –671 39 –343 –15 –1 –991


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. The foreign entities are controlled by the Group and these earnings are not expected to be repatriated in the foreseeable future. The amount of such temporary differences was approximately CHF 5.6 billion as at 31 December 2012 (2011: CHF 4.4 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
  31.12.2012 31.12.2011 31.12.2012 31.12.2011
2013
  1 1 16.5% 16.7%
2014
  8 8 16.0% 16.0%
2015
  1 1 17.8% 17.7%
Thereafter
  1 115 1 126 12.3% 13.1%
Total
  1 125 1 136 n/a n/a


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