Note 21 Income Taxes

	For the year ended
CHF million	31.12.05	31.12.04	31.12.03

Tax expense from continuing operations
Domestic
Current	1,490	1,225	795
Deferred	64	13	99
Foreign
Current	1,441	828	264
Deferred	(446)	158	261
Total income tax expense from continuing operations	2,549	2,224	1,419

Tax expense from discontinued operations
Total income tax expense from discontinued operations	498	129	79
Total income tax expense	3,047	2,353	1,498

The Group made net tax payments, including domestic and foreign taxes, of CHF 2,394 million, CHF 1,345 million and CHF 1,117 million for the full years of 2005, 2004 and 2003 respectively.

The components of operating profit before tax, as well as the differences between income tax expense reflected in the Financial Statements and the amounts calculated at the Swiss statutory rate, are as follows:


	For the year ended
CHF million	31.12.05	31.12.04	31.12.03
Operating profit from continuing operations before tax	13,049	10,287	7,272
Domestic	6,241	5,882	4,996
Foreign	6,808	4,405	2,276
Income taxes at Swiss statutory rate of 22% for 2005 and 24% for 2004 and 2003	2,871	2,469	1,745

Increase / (decrease) resulting from:
Applicable tax rates differing from Swiss statutory rate	436	137	(233)
Tax losses not recognized	75	103	85
Previously unrecorded tax losses now recognized	(100)	(249)	(291)
Lower taxed income	(603)	(660)	(366)
Non-deductible goodwill and other intangible asset amortization	22	262	386
Other non-deductible expenses	223	219	186
Adjustments related to prior years and other	(219)	(296)	(191)
Change in deferred tax valuation allowance	(156)	239	98
Income tax expense from continuing operations	2,549	2,224	1,419

Significant components of the Group’s gross deferred income tax assets and liabilities are as follows:

CHF million	31.12.05	31.12.04
Deferred tax assets
Compensation and benefits	1,851	1,582
Net operating loss carry-forwards	2,235	2,251
Trading assets	586	483
Other	804	906
Total	5,476	5,222
Valuation allowance	(2,718)	(2,668)
Net deferred tax assets	2,758	2,554
Deferred tax liabilities
Compensation and benefits	55	119
Property and equipment	515	542
Investments	468	343
Provisions	0	313
Trading assets	448	408
Intangible assets	264	272
Other	883	1,149
Total deferred tax liabilities	2,633	3,146

The change in the balance of net deferred tax assets and deferred tax liabilities does not equal the deferred tax expense in those years. This is mainly due to the impact of the effects of foreign currency rate changes on tax assets and liabilities denominated in currencies other than CHF, as well as the booking of some of the tax benefits related to deferred compensation through Equity. In 2004, the acquisition of Motor-Columbus also had a significant impact.Certain foreign branches and subsidiaries of the Group have deferred tax assets related to net operating loss carry-forwards and other items. Because realization of these assets is uncertain, the Group has established valuation allowances of CHF 2,718 million (CHF 2,668 million at 31 December 2004). For companies that suffered tax losses in either the current or preceding year, an amount of CHF 442 million (CHF 436 million at 31 December 2004) has been recognized as deferred tax assets based on expectations that sufficient taxable income will be generated in future years to utilize the tax loss carry-forwards.

The Group provides deferred income taxes on undistributed earnings of non-Swiss subsidiaries except to the extent that such earnings are indefinitely invested. In the event these earnings were distributed, additional taxes of approximately CHF 20 million would be due.

At 31 December 2005 net operating loss carry-forwards totaling CHF 5,553 million (not recognized as a deferred tax asset) are available to reduce taxable income of certain branches and subsidiaries.

The carry forwards expire as follows:	31.12.05
Within 1 year	8
From 2 to 4 years	211
After 4 years	5,334
Total	5,553