XML 33 R23.htm IDEA: XBRL DOCUMENT v3.24.3
Income taxes
 9 Months Ended
Sep. 30, 2024
Income taxes
 
NOTE 11 – Income taxes:
In the third quarter of 2024, Teva recognized a tax expense of $69 million, on a
pre-tax
loss
 of $324 million. In the third quarter of 2023, Teva recognized a tax benefit of $12 million, on a
pre-tax
 
income
 of $64 
million. Teva’s tax rate for the third quarter of 2024 was mainly impacted by impairment charges with no corresponding tax effects, an adjustment to the Company’s corporate tax rate in Israel on losses related to
non-qualified
tax incentive activities in Israel, legal expenses with no corresponding tax effect related to the fine issued by the European Commission in connection with its antitrust investigation into COPAXONE, and recording of valuation allowance with respect to certain carry over credits outside of Israel. Teva’s tax rate for the third quarter for 2023 was mainly affected by deferred tax benefits resulting from intellectual property related integration plans, which have been adopted, among others, in an effort of addressing the global adoption of the Organization for Economic
Co-operation
and Development (OECD) Pillar Two minimum effective corporate tax. The
pre-tax
loss in the third quarter of 2023 was revised as discussed in note 1c.
In the first nine months of 2024, Teva recognized a tax expense of $648 million, on a
pre-tax
loss of $1,037 million. In the first nine months of 2023, Teva recognized a tax benefit of $48 million, on a
pre-tax
loss of $1,131 
million. Teva’s tax rate for the first nine months of 2024 was mainly impacted by a settlement agreement with the Israeli Tax Authorities (“ITA”) as discussed below, impairment charges with no corresponding tax effects, deferred tax benefits resulting from intellectual property related integration plans, an adjustment to the Company’s corporate tax rate in Israel on losses related to
non-qualified
tax incentives activities in Israel, legal expenses with no corresponding tax effect related to the fine issued by the European Commission in connection with its antitrust investigation into COPAXONE, and recording of valuation allowance with respect to certain carry over credits outside of Israel. Teva’s tax rate for the first nine months of 2023 was mainly affected by deferred tax benefits from intellectual property related integration plans, impairments, legal settlements, and interest expense disallowances. The
pre-tax
loss in the first nine months of 2023 was revised as discussed in note 1c.
The statutory Israeli corporate tax rate is 23% in 2024. Teva’s global tax rate differs from the Israeli statutory tax rate, mainly due to generation of profits in various jurisdictions in which tax rates are different than the Israeli tax rate, tax benefits, as well as infrequent or
non-recurring
items.
Teva filed a claim seeking the refund of withholding taxes paid to the Indian tax authorities in 2012. A trial for this case is currently ongoing. A final and binding decision against Teva in this case may lead to a charge of $125 million.
On June 23, 2024, Teva entered into an agreement with the ITA to settle certain litigation with respect to taxes payable for the Company’s taxable years 2008 through 2020 (the “Agreement”). Pursuant to the terms of the Agreement, the Company will pay a total amount of approximately $750 million to the ITA spread over a
six-year
period beginning this year. The Company has the right to prepay, and amounts paid over time are subject to interest and increase for inflation. Such total amount includes: (i) $495 million in corporate taxes with respect to the Company’s historical earnings that were previously considered by the Company to be exempt from taxes under the Encouragement for Capital Investment Law; and (ii) approximately $250 million in corporate taxes, relating to additional disputed tax issues in the aforementioned taxable years. The Agreement resulted in an increase of $506 million in the Company’s total income taxes in the second quarter of 2024, as certain elements had been recognized in previous periods. Additionally, under the terms of the Agreement, it was further agreed that in the future event the Company pays dividends on, or repurchases, its equity interests, the Company will pay an additional
5%-7%
of the amount of such dividends or repurchases in corporate taxes, up to a maximum tax payment amount of approximately $500 million. Any amounts due under this provision of the Agreement will be recorded in the future as incurred.
Teva believes it has adequately provided for all of its uncertain tax positions, including items currently under dispute, however, adverse results could be material.
The OECD introduced Base Erosion and Profit Shifting (“BEPS”) Pillar Two rules that impose a global minimum tax rate of 15% for large multinational corporations. On December 12, 2022, the EU Council announced that EU member states had reached an agreement to implement the minimum taxation component of 15% of the OECD’s reform of international taxation. Other countries have also enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax by January 1, 2025. Teva has evaluated the potential impact on its 2024 consolidated financial statements and related disclosures and does not expect Pillar Two to have a material impact on its effective tax rate or consolidated financial statements in the foreseeable future.