2.7 Income tax

Reconciliation

Income tax expense charged to the income statement

Change in deferred tax assets and liabilities

Deferred tax assets and liabilities by origination of temporary differences

At 31 December 2023, individual subsidiaries held tax loss carryforwards totalling CHF 207 million (previous year: CHF 638 million), which are available for offsetting against future taxable profits. Of these, the Alpiq Group has not recognised tax benefits on tax loss carryforwards of CHF 133 million (CHF 397 million) in the balance sheet item “Deferred tax assets”, as these are recognised only to the extent that realisation of the related tax benefit is probable. The average tax rate on tax loss carryforwards not eligible for capitalisation is 19% (17%). These tax loss carryforwards expire in the following periods:

In addition, there are unrecognised deductible temporary differences totalling CHF 11 million (CHF 167 million).

Global minimum corporate taxation

Under an OECD Inclusive Framework, more than 140 countries agreed to enact a two-pillar solution to address the challenges arising from the digitalisation of the economy. Pillar Two introduces a global minimum Effective Tax Rate (ETR), where multinational groups with consolidated revenue of more than EUR 750 million are subject to a minimum ETR of 15% on income arising in low-tax jurisdictions.

The Swiss constitutional amendment providing the legal basis for the implementation of Pillar Two was approved in a public vote on 18 June 2023. The Swiss Federal Council decided to implement a Qualifying Domestic Minimum Top-up Tax (QDMTT) as of 1 January 2024, ensuring that the Pillar Two ETR applies to all domestic entities within the scope of Pillar Two. By the end of 2024, the Swiss Federal Council may decide on the implementation of the other elements of Pillar Two, i.e. the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).

Alpiq is within the scope of the OECD Pillar Two model rules. Since the Pillar Two legislation was not effective at the reporting date, Alpiq has no related current tax impact for the year ended 31 December 2023. Alpiq applies the temporary mandatory exception from deferred tax accounting for the impact of the top-up tax as provided in the amendments to IAS 12 issued in May 2023, and will account for it as a current tax when it is incurred.

The group is in the process of assessing its future exposure to the Pillar Two legislation. Due to the complexities in application of the legislation and calculation of the GloBE ETR, the quantitative impact of the enacted or substantively enacted legislation is not yet reasonably estimable.

Accounting policies

Income tax expense represents the sum of current and deferred income tax. Current income tax is calculated on taxable earnings using the tax rates that have been enacted by the end of the reporting period. Deferred income tax is calculated using the tax rates enacted or substantively enacted at the reporting date.

Deferred taxes are recognised due to the differing recognition of certain income and expense items in the Group’s annual internal accounts and annual tax accounts. Deferred tax arising from temporary differences is calculated applying the balance sheet liability method. Deferred tax is not recognised for differences associated with investments in group companies, which will not be reversed in the foreseeable future and where the timing of the reversal is controlled by the Group. Deferred tax assets are recognised when it is probable that they will be realised.

Furthermore, definitive clarification of the taxation issue at the partner power plants in canton Graubünden is still pending.