13Income taxes

The weighted average 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 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 2021 was 28.9% (2020: 35.8%). The effect of tax loss carryforwards and allowances of deferred tax assets in the amount of CHF –4.7 million consist of restructuring expenses related to closed facilities and divestments of businesses with no corresponding tax effects. Expenses not deductible for tax purposes in the amount of CHF –5.3 million mainly relate to the disallowance of group charges and interests. Prior year items and others include additional provision for uncertain tax positions in the amount of CHF 1.1 million, tax base adjustments in Russia and Mexico, and negative tax audit assessments.

The effective income tax rate for 2020 was 35.8%. The effect of tax loss carryforwards and allowances of deferred tax assets in the amount of CHF –3.5 million consist of restructuring expenses related to closed facilities with no corresponding tax effects. Expenses not deductible for tax purposes in the amount of CHF –5.6 million mainly relate to the disallowance of group charges and interests. Prior year items and others include additional provision for uncertain tax positions in the amount of CHF 4.2 million.

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, 2021, amounted to CHF 0.5 million (2020: CHF 13.3 million). The group does not recognize any deferred taxes on investments in subsidiaries because it controls the dividend policy of its subsidiaries — 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.

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 119.3 million (2020: CHF 126.6 million).