Income taxes

9 Months Ended

Sep. 30, 2023

Income taxes

NOTE 11 – Income taxes:

In the third quarter of 2023, Teva recognized a tax benefit of $12 million, on a pre-tax income of $75 million. In the third quarter of 2022, Teva recognized a tax expense of $107 million, on a pre-tax income of $166 million. Teva’s tax rate for the third quarter of 2023 was mainly affected by deferred tax benefits resulting from intellectual property related integration plans. Such integration plans 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, commencing in 2024.

In the first nine months of 2023, Teva recognized a tax benefit of $48 million, on a pre-tax loss of $1,097 million. In the first nine months of 2022, Teva recognized a tax benefit of $792 million, on a pre-tax loss of $1,964 million. 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 statutory Israeli corporate tax rate is 23% in 2023. Teva’s 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 in Israel and other countries, 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 $126 million.

The Israeli tax authorities (“ITA”) issued tax assessment decrees for 2008-2011, 2012 and 2013-2016, challenging the Company’s positions on several issues. Teva has protested the 2008-2011, 2012 and 2013-2016 decrees before the Central District Court in Israel. On April 17, 2023, the ITA issued a tax assessment for 2017-2020 challenging the Company’s positions on several issues. The Company intends to challenge the tax assessment for 2017-2020 as well.

In October 2021, the Central District Court in Israel held in favor of the ITA with respect to the 2008-2011 decrees. The case with respect to the 2012-2016 decrees remains pending with similar legal and other claims. Teva appealed this decision to the Israeli Supreme Court and expects the appeal hearing to begin in March 2024. The tax liability resulting from the October 2021 Central District Court decision, with respect to the decrees for 2008-2011 and the similar legal claims in the related following years, was approximately $350 million, of which a portion has been paid in 2022 and 2023 and will continue to be paid during 2024 and 2025. 

The Company believes it has adequately provided for all of its uncertain tax positions, including those items currently under dispute, however, adverse results could be material.