Accounting policy
Income tax expense is recognized in the income statement except to the extent that it relates to an item recognized directly in Other comprehensive income or Shareholders’ equity.
Current tax is the expected tax payable or receivable on the taxable income for the year, using tax rates (substantively) enacted at the balance sheet date, plus any adjustment to tax payable with respect to previous years. The current tax position also reflects any uncertainty related to income taxes. Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the carrying amount of assets and liabilities and their tax base. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantially enacted at the balance sheet date, and reflect any uncertainty related to income taxes and are expected to apply when the related deferred tax assets are realized or the deferred tax liabilities are settled. Deferred tax assets, including assets arising from losses carried forward and tax credits, are reassessed over time and recognized to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences and unused tax losses can be utilized. Deferred tax assets and liabilities are stated at nominal value.
Deferred taxes are not provided for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax assets and deferred tax liabilities are offset and presented net when there is a legally enforceable right to offset, and the assets and liabilities relate to income taxes levied by the same taxation authority.
Estimates and judgments
Key estimates for income tax generally relate to uncertain tax positions that could result from varying interpretations of tax legislation by local tax authorities in the countries where dsm-firmenich operates. For the measurement of the uncertainty, dsm-firmenich uses the most likely amount or the expected value method to estimate the underlying risk. This requires judgments, and the final outcome may deviate from the estimates.
Income tax
The income tax expense on continuing operations was €118 million, which represents an effective income tax rate of 20.8% (2024: tax expense of €64 million, representing an effective income tax rate of 15.1%). The breakdown of the income tax expense on continuing operations is shown in the table below. Since, from a reporting and legal perspective, the continuing and discontinued operations were still fully intertwined for full-year 2024 and a substantial part of 2025, allocation models were applied to determine the split of the tax charge between continuing and discontinued operations for the reporting and the comparative year. The allocation considers multiple factors, circumstances, and allocation keys, and represents management’s best possible estimate.
Pillar Two legislation has been enacted in a number of jurisdictions in which dsm-firmenich operates. dsm-firmenich applies the temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as a current tax when it is incurred. The current income tax expense relating to Pillar Two legislation was less than €1 million in 2025 (2024: less than €1 million) because of the geographical spread of the business results.
The total effective tax rate on the taxable result in 2025 was 20.8% (2024: 15.1%). Excluding APM adjustments, this was 20.8% as well (2024: 14.9%). The effective tax rate in 2025 compared to the Swiss statutory rate was negatively impacted mainly by the geographical spread, non-recoverable withholding tax, and changes in the valuation of deferred tax assets regarding losses and other carry-forward positions.
The effective tax rates in 2024 and 2025 excluding APM adjustments stem from two different situations. As stated, in 2024 the businesses from continuing and discontinued operations were still fully integrated and intertwined. In the course of 2025, the carve-out of the ANH business was realized and separate legal entities were created to facilitate a standalone operation for ANH. Therefore, a part of the difference between the effective tax rates in these years is caused by the difference in set-up and the mathematical outcome of the allocation methods applied to determine the split of the tax charge for 2024 and 2025 between continuing and discontinued operations.
|
|
2025 |
|
2024 |
|---|---|---|---|---|
Current tax (expense)/benefit: |
|
|
|
|
- Current year |
|
(243) |
|
(209) |
- Prior-year adjustments |
|
14 |
|
7 |
-Tax credits compensated |
|
13 |
|
12 |
- Non-recoverable withholding tax |
|
(7) |
|
(1) |
Total current tax (expense)/benefit |
|
(223) |
|
(191) |
|
|
|
|
|
Deferred tax (expense)/benefit: |
|
|
|
|
- Originating from temporary differences and their reversal |
|
102 |
|
127 |
- Prior-year adjustments |
|
(10) |
|
1 |
- Change in tax rate |
|
3 |
|
4 |
- Changes arising from write-down of deferred tax assets |
|
(14) |
|
(4) |
- Changes in previously and newly recognized tax losses and tax credits |
|
24 |
|
(1) |
Total deferred tax (expense)/benefit |
|
105 |
|
127 |
Total tax (expense)/benefit |
|
(118) |
|
(64) |
|
|
|
|
|
Of which related to: |
|
|
|
|
- Taxable result excl. APM adjustments |
|
(153) |
|
(104) |
- APM adjustments |
|
35 |
|
40 |
The relationship between the income tax rate in Switzerland and the effective tax rate on the taxable result can be explained as follows.
In % |
|
2025 |
|
2024 |
|---|---|---|---|---|
Domestic income tax rate |
|
15.1 |
|
15.1 |
|
|
|
|
|
Tax effects of: |
|
|
|
|
- Deviating rates |
|
3.9 |
|
0.4 |
- Change in tax rates |
|
(0.4) |
|
0.5 |
- Tax-exempt income and non-deductible expense |
|
(0.6) |
|
(1.6) |
- Other effects |
|
2.8 |
|
0.5 |
Effective tax rate taxable result, excl. APM adjustments |
|
20.8 |
|
14.9 |
|
|
|
|
|
APM adjustments (see Note 2) |
|
– |
|
0.2 |
Total effective tax rate |
|
20.8 |
|
15.1 |
Deferred tax assets and liabilities
The negative balance of the deferred tax assets and deferred tax liabilities decreased by €133 million owing to the changes presented in the table below.
In various countries, dsm-firmenich has taken standpoints regarding its tax position which may at any time be challenged, or have already been challenged, by the tax authorities, because the authorities in question interpret the law differently. For particular tax treatments for which there exists uncertainty that they are accepted by tax authorities, dsm-firmenich either recognizes a liability or reflects the uncertainty in the recognition and measurement of its current and deferred tax assets and liabilities.
The deferred tax assets and liabilities relating to the balance sheet items are shown in the second table below.
The valuation of deferred tax assets depends on the probability of the reversal of temporary differences as well as the utilization of tax loss carry-forwards, tax credits, and withholding tax. Deferred tax assets are recognized for future tax benefits arising from temporary differences and for tax loss carryforwards to the extent that the tax benefits are probable. dsm-firmenich assesses the likelihood that deferred tax assets will be recovered from future taxable profits. Deferred tax assets are reduced if, and to the extent that, it is not probable that all or some portion of the deferred tax assets will be realized. In the event that actual future results differ from estimates, and depending on tax strategies that dsm-firmenich may be able to implement, changes to the measurement of deferred taxes could be required, which could have an impact on the company’s financial position and profit for the year.
From the total amount of recognized net deferred tax assets, €20 million (2024: €50 million) relates to entities that suffered a loss in either 2025 or 2024 and where utilization is dependent on future taxable profits in excess of the charges arising from the reversal of existing taxable temporary differences. For these entities, net deferred tax assets were recognized on dsm-firmenich’s long-term projection.
No deferred tax assets were recognized for carry-forward losses amounting to €1,320 million (2024: €560 million). Unrecognized carry-forward losses amounting to €266 million will expire in the years up to and including 2030 (2024: €66 million up to and including 2029), €531 million losses between 2031 and 2035 (2024: nil losses between 2030 and 2034) and the remaining €523 million in 2036 and beyond (2024: €494 million in 2035 and beyond). In addition, an amount of €26 million (2024: €15 million) of withholding taxes and an amount of €19 million (2024: nil) of carry-forward interest were unrecognized.
No deferred tax liability is recognized on temporary differences relating to unremitted retained earnings of subsidiaries, as the Group is able to control the timings of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. The amount of unremitted retained earnings on which no deferred tax liability has been provided for represents €3,297 million (2024: €2,957 million).
|
|
2025 |
|
2024 |
|---|---|---|---|---|
Balance at January 1 |
|
|
|
|
Deferred tax assets |
|
299 |
|
228 |
Deferred tax liabilities |
|
(1,556) |
|
(1,751) |
Total |
|
(1,257) |
|
(1,523) |
|
|
|
|
|
Changes: |
|
|
|
|
- Income tax income/(expense) in income statement |
|
427 |
|
177 |
- Income tax: change in tax percentage |
|
(6) |
|
– |
Total income statement |
|
421 |
|
177 |
|
|
|
|
|
- Income tax expense in OCI |
|
(20) |
|
2 |
- Acquisitions and disposals |
|
4 |
|
2 |
- Transfers |
|
7 |
|
71 |
- Exchange differences |
|
– |
|
14 |
- Reclassification to held for sale |
|
(279) |
|
– |
Balance at 31 December |
|
(1,124) |
|
(1,257) |
|
|
|
|
|
Of which: |
|
|
|
|
- Deferred tax assets |
|
227 |
|
299 |
- Deferred tax liabilities |
|
(1,351) |
|
(1,556) |
|
|
2025 |
|
2024 |
||||
|---|---|---|---|---|---|---|---|---|
|
|
Deferred tax assets |
|
Deferred tax liabilities |
|
Deferred tax assets |
|
Deferred tax liabilities |
Intangible assets |
|
142 |
|
(1,253) |
|
60 |
|
(1,357) |
Property, plant and equipment |
|
243 |
|
(284) |
|
31 |
|
(283) |
Right-of-use assets |
|
9 |
|
(77) |
|
1 |
|
(71) |
Financial assets |
|
46 |
|
(27) |
|
41 |
|
(11) |
Inventories |
|
118 |
|
(24) |
|
122 |
|
(24) |
Receivables |
|
36 |
|
(26) |
|
15 |
|
(25) |
Reclassification to held for sale |
|
(379) |
|
100 |
|
– |
|
– |
Lease liabilities non-current |
|
68 |
|
– |
|
61 |
|
– |
Non-current provisions |
|
68 |
|
(18) |
|
74 |
|
(56) |
Other non-current liabilities |
|
1 |
|
(28) |
|
– |
|
(26) |
Lease liabilities current |
|
12 |
|
– |
|
11 |
|
– |
Other current liabilities |
|
62 |
|
(24) |
|
85 |
|
(5) |
|
|
426 |
|
(1,661) |
|
501 |
|
(1,858) |
|
|
|
|
|
|
|
|
|
Tax losses carried forward |
|
111 |
|
– |
|
100 |
|
– |
Set-off |
|
(310) |
|
310 |
|
(302) |
|
302 |
Total |
|
227 |
|
(1,351) |
|
299 |
|
(1,556) |