5.1 Income Taxes

In the reporting period, cumulated one-time effects of CHF 17.1 million led to an effective tax rate of 3.9% (2022: 16.8%).

As Belimo operates in several jurisdictions, the applicable tax rate is computed as the weighted average of the applicable tax rate per jurisdiction. The applicable tax rate increased by +1.4 percentage points in the reporting period (2022: -0.8 percentage points). There were no major changes in the structure of Belimo Group that impacted the applicable tax rate in 2023 and 2022.

In accordance with the Swiss federal law on the tax reform and AHV financing (TRAF), the Canton of Zurich, where Belimo is headquartered, introduced certain provisions in the cantonal tax laws (e.g. patent box, additional research, and development deductions) including transitional measures. Based on these transitional measures, in the balance sheet, deferred tax assets on intangible assets of CHF 28.2 million were recognized as at December 31, 2023 (2022: CHF 19.8 million). The increase of the deferred tax assets resulted from a change in the planned application of the patent box. This change directly impacts the transitional measures and the valuation of deferred tax assets. Consequently, an amount of CHF 6.6 million is resulting from the tax valuation adjustment on temporary differences and an additional amount of CHF 10.6 million could be recognized and is disclosed as adjustments from previous years, and deferred tax assets relating to temporary differences of CHF 6.8 million (2022: CHF 13.3 million) are not recognized.

Tax-exempt income includes additional research and development deductions of CHF 4.0 million (2022: CHF 3.6 million) and patent box deduction of CHF 1.8 million because of Belimo’s strong research and development base in Switzerland. Some Group companies are taxed at different rates, depending on the source of income. The effect of these mixed tax rates is presented as a separate item in the reconciliation above.

Deferred Taxes

In the reporting period and in the previous year, the Group did not consider temporary differences resulting from investments in Group companies because it controls the dividend policy of its subsidiaries while all subsidiaries are directly or indirectly owned by the Swiss Holding where the deduction for income from subsidiaries is applicable. Due to the deduction, there is no significant tax effect from dividend payments.

In 2023 deferred tax assets relating to tax losses and credits amounting to CHF 1.0 million are not recognized (2022: CHF 0.8 million). At the reporting date, deferred tax assets of CHF 1.8 million (2022: CHF 1.7 million) are recognized for Group companies that incurred losses supported by taxable temporary differences and expected future profitability.

The following table summarizes the movements in the net deferred tax position:

Deferred tax assets on tax loss carryforwards and tax credits as well as loss carryforwards not recognized expire as follows:

In the current year, no tax loss carryforwards not recognized in the previous year have been recognized (2022: CHF 0.5 million).

International Tax Reforms - Pillar Two Model Rules

In Switzerland and various other jurisdictions in which Belimo operates, the Global Anti-Base Erosion Rules (GloBE - Pillar Two) were enacted as per December 31, 2023. Being in the scope of the enacted legislation, Belimo applied the exception to recognize and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes. However, the legislation was enacted close to the reporting date. Therefore, the Group is still in the process of assessing the potential exposure to Pillar Two income taxes as at December 31, 2023. The potential exposure, if any, to Pillar Two income taxes cannot be reasonably determined. The Group expects to be in a position to report the potential exposure in its next interim financial statements for the period ending June 30, 2024.

5.2 Related Parties

In 2023 and 2022, the total booked compensation for the Board of Directors and Executive Committee was as follows:

Further information regarding compensation and investments of the Board of Directors and Executive Committee is disclosed in the Remuneration Report 2023.

Transactions between Belimo and the pension funds are detailed in Personnel Expenses.

In 2023 and 2022, there were no further material related party transactions.

5.3 Events after the Reporting Date

On March 1, 2024, the Board of Directors of BELIMO Holding AG approved the present consolidated financial statements for release. As of this date, no material events after the reporting date have occurred. The consolidated financial statements are subject to approval by the shareholders of BELIMO Holding AG at the Annual General Meeting to be held on March 25, 2024.