11 Income taxes

For the reconciliation of the income tax expenses, the group used the weighted average tax rate for the group tax rate. The weighted average tax rate results from applying each subsidiary’s statutory income tax rate to the income before taxes based on absolute values (that is, making all values positive). Since the group operates in countries that have differing tax laws and rates, the consolidated weighted average effective tax rate will vary from year to year according to variations in income per country and changes in applicable tax rates.

Reconciliation of income tax expenses

The effective income tax rate for 2024 is –0.7%. The effect of income taxed at different tax rates in the amount of CHF 1.3 million consists partially of tax-deductible impairments of investments in foreign subsidiaries and associates. In addition, the effective income tax rate in 2024 was negatively impacted by the non-recognition of tax loss carryforwards of CHF 4.4 million. The prior year items and others of CHF 1.7 million consists partially of prior year adjustments in group entities in Germany and China.

The effective income tax rate for 2023 was 76.7%. The effect of income taxed at different tax rates in the amount of CHF 2.6 million consists partially of a tax-deductible impairment of an investment in a foreign subsidiary. The negative effect of changes in tax rates and legislation in the amount of CHF –2.2 million relates to a release of deferred tax assets following a change of tax status of a legal entity in Switzerland. Without the mentioned effects, the effective income tax rate would have been 23.2%.

Income tax liabilities

Summary of deferred income tax assets and liabilities in the balance sheet

Cumulative deferred income taxes recorded in equity as of December 31, 2024, amounted to CHF 2.0 million (2023: CHF 3.0 million).

The group does not recognize any deferred taxes on investments in group entities because it controls the dividend policy of its entities, i.e., the group controls the timing of reversal of the related taxable temporary differences and management is satisfied that no material amounts will reverse in the foreseeable future. The aggregate amount of unrecognized temporary differences associated with investments in subsidiaries amounted to CHF 111.3 million (December 31, 2023: CHF 105.7 million), resulting in unrecognized deferred tax liabilities of CHF 5.6 million (December 31, 2023: CHF 5.3 million).

Movement of deferred income tax assets and liabilities in the balance sheet

Tax loss carryforwards (TLCF)

Deferred income tax assets are recognized for tax loss carryforwards to the extent that the realization of the related tax benefit through future taxable profits is probable. No deferred income tax assets have been recognized on tax loss carryforwards in the amount of CHF 26.9 million (2023: CHF 12.3 million).

The utilization of deferred tax assets on unused tax losses depends on future taxable profits exceeding the profits arising from the reversal of existing taxable temporary differences. Some entities that have recognized deferred tax assets amounting to CHF 12.7 million as of December 31, 2024 (CHF 7.0 million in 2023), have incurred losses in the current and/or preceding periods in the tax jurisdictions to which the deferred tax assets relate. The group has analyzed estimated future taxable profits and considers it probable that future taxable profit will be available in the coming years against which these tax losses can be recognized.

As part of the OECD BEPS 2.0 project, Switzerland, along with some 140 other countries, has made a commitment to implement the OECD global minimum tax (also referred to as Pillar Two legislation). In certain jurisdictions in which the group operates, Pillar Two legislation was enacted from January 1, 2024. The rules apply to multinational groups with a total consolidated revenue of EUR 750 million or more in at least two of the four preceding years. Based on this, the legislation does not apply to the group, as the group’s consolidated revenue is below this threshold. Therefore, the group is not expecting any exposure to Pillar Two top-up taxes in the foreseeable future. However, medmix is monitoring the situation very closely.