7 INCOME TAXES

On May 19, 2019, the Swiss electorate passed the Federal Act on Tax Reform and AHV Financing (TRAF). The tax reform abolishes the tax regimes for holding, domiciliary and mixed companies as of January 1, 2020, and introduces new tax calculation principles. As part of the TRAF and cantonal tax practice, transitional measures were introduced to ease the transition from the current reliefs to the new tax calculation principles. For the Group, these measures allow amongst others the tax-effective amortization of a step-up amount over a period of up to 10 years. Therefore, the Group started to capitalize corresponding deferred tax assets in 2019.

Deferred tax assets capitalized in connection with the step-up amount:

In 2019, the Organisation for Economic Cooperation and Development (OECD) started a two-pillar approach to address the “Tax Challenges of the Digital Economy” resulting from the 2015 Base Erosion and Profit Shifting (BEPS) project. A stated goal of the Pillar One proposal is to allocate a greater share of residual profits to market/user jurisdictions. The Pillar Two goal suggests an implementation of the proposed 15% global minimum tax. Tecan will be within the scope of Pillar Two.

The OECD and participating countries continue to work toward the implementation of a 15% global minimum corporate tax and some governments have begun to enact Pillar Two rules. In the public vote on June 18, 2023, Swiss voters approved a new constitutional provision on the implementation of the “Pillar Two Model Rules”. This provision gives the Swiss Federal Council the power to implement the “Pillar Two Model Rules” via a temporary ordinance. On December 22, 2023, the Swiss Federal Council decided to implement the Qualified Domestic Minimum Top-up Tax via the ordinance, starting for financial years beginning on or after January 1, 2024. This Qualified Domestic Minimum Top-up Tax provides for a 15% minimum taxation based on Pillar Two qualifying profits earned by companies domiciled in Switzerland (but not abroad as Switzerland has not yet implemented the Income Inclusion Rule). Other countries (mainly EU member states, UK, Japan, Vietnam, South Korea, Malaysia) in which Tecan operates have enacted or substantively enacted tax legislation related to Pillar Two with effect in financial year 2024 or later.

Although global enactment has begun, the OECD and participating countries continue to work on defining the underlying rules and administrative procedures. Tecan is monitoring these developments and continue to assess its potential exposure from enactment of Pillar Two legislation.

Based on the assessment carried out so far, only the enactment of Pillar Two legislation in Switzerland could eventually have an impact to Tecan's income taxes as from 2024. In other countries where the Group operates and that have (substantively) enacted Pillar Two legislation Tecan does not expect any impact that is material to the income tax charge and cash flows. For the six months reporting ended June 30, 2024 the Group did not recognize a current tax expense related to the top-up tax.