Philip Morris International Inc.PM
Philip Morris International Inc. Income Taxes Disclosure
Income Taxes:
PMI adopted Accounting Standards Update ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”) on a prospective basis within its annual reporting for the year ended December 31, 2025. For further details, see Note 21. New Accounting Standards.
Earnings before income taxes and provision for income taxes consisted of the following for the year ended December 31, 2025:
(in millions) | 2025 | ||||
Earnings before income taxes | |||||
| United States | $ | 870 | |||
| Foreign | 13,010 | ||||
| Total earnings before income taxes | $ | 13,880 | |||
Provision for income taxes: | |||||
Current tax expense (benefit) | |||||
U.S. Federal | $ | 371 | |||
| U.S. State and Local | 31 | ||||
Foreign | 3,182 | ||||
Total current tax expense (benefit) | 3,584 | ||||
Deferred tax expense (benefit) | |||||
U.S. Federal | (817) | ||||
| U.S. State and Local | (40) | ||||
Foreign | 10 | ||||
Total deferred tax expense (benefit) | (847) | ||||
Total provision for income taxes | $ | 2,737 | |||
Earnings before income taxes and provision for income taxes consisted of the following for the years ended December 31, 2024 and 2023:
(in millions) | 2024 | 2023 | |||||||||
Earnings before income taxes | $ | 12,199 | $ | 10,450 | |||||||
Provision for income taxes: | |||||||||||
United States federal and state: | |||||||||||
Current | $ | 465 | $ | 201 | |||||||
Deferred | (81) | (368) | |||||||||
Total United States | 384 | (167) | |||||||||
Outside United States: | |||||||||||
Current | 2,668 | 2,468 | |||||||||
Deferred | (35) | 38 | |||||||||
Total outside United States | 2,633 | 2,506 | |||||||||
Total provision for income taxes | $ | 3,017 | $ | 2,339 | |||||||
On July 4, 2025, the One Big Beautiful Bill Act ("the Act") was signed into law in the U.S. The Act contains several provisions related to corporate income taxes, including the extension of many expiring provisions from the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The provisions and modifications included in the Act did not have a material impact on PMI’s 2025 consolidated financial statements.
Changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting project undertaken by the Organisation for Economic Co-operation and Development (“OECD”), which recommended changes to numerous long-standing tax principles. Many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for
taxable years beginning after December 31, 2023. PMI has determined that Pillar Two did not have a material impact on its 2024 or 2025 consolidated financial statements.
At December 31, 2025, U.S. federal and foreign deferred income taxes have been provided on all accumulated earnings of PMI's foreign subsidiaries.
PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. The U.S. federal statute of limitations remains open for the years 2019 and onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years after the filing of a return. Years still open to examination by foreign tax authorities in major jurisdictions include Indonesia (2020 onward), Italy (2020 onward), Russia (2023 onward) and Switzerland (2021 onward).
Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 4.5 trillion Indonesian rupiah (approximately $269 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2017 to 2023. Objection letters have been filed with the Tax Office and these assessments are being challenged at various levels in court. These income tax receivables are included in other assets in PMI’s consolidated balance sheets at December 31, 2025.
It is reasonably possible that within the next 12 months certain tax examinations will close, which could result in a change in unrecognized tax benefits along with related interest and penalties. An estimate of any possible change cannot be made at this time.
A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:
(in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at January 1, | $ | 56 | $ | 55 | $ | 72 | |||||||||||
Additions based on tax positions related to the current year | 40 | 6 | 7 | ||||||||||||||
Additions for tax positions of previous years | 42 | 1 | 1 | ||||||||||||||
Reductions for tax positions of prior years | (34) | — | (23) | ||||||||||||||
Reductions due to lapse of statute of limitations | (4) | (2) | (3) | ||||||||||||||
Other | 5 | (4) | 1 | ||||||||||||||
| Balance at December 31, | $ | 105 | $ | 56 | $ | 55 | |||||||||||
Unrecognized tax benefits and PMI’s liability for contingent income taxes, interest and penalties were as follows:
(in millions) | December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||
Unrecognized tax benefits | $ | 105 | $ | 56 | $ | 55 | |||||||||||
Accrued interest and penalties | 25 | 11 | 9 | ||||||||||||||
Tax credits and other indirect benefits | (1) | (1) | (1) | ||||||||||||||
Liability for tax contingencies | $ | 129 | $ | 66 | $ | 63 | |||||||||||
The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $108 million at December 31, 2025. The remainder, if recognized, would principally affect deferred taxes.
For the years ended December 31, 2025, 2024 and 2023, PMI recognized income (expense) in its consolidated statements of earnings of $(14) million, $(2) million and $5 million, respectively, related to interest and penalties associated with uncertain tax positions.
The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the year ended December 31, 2025:
(in millions) | |||||||||||
| Pretax income | $13,880 | ||||||||||
| Amount | Percentage | ||||||||||
| Provision Computed at Statutory U.S. Tax Rate | $ | 2,915 | 21.0 | % | |||||||
| State and Local Income Taxes, Net of Federal Income Tax Effects* | (12) | (0.1) | |||||||||
| Foreign Tax Effects: | |||||||||||
| Switzerland: | |||||||||||
| Swiss Federal Rate Differential | (920) | (6.6) | |||||||||
| Cantonal Taxes - Vaud | 248 | 1.8 | |||||||||
| Cantonal Taxes - Neuchatel | 255 | 1.8 | |||||||||
| Other | (10) | (0.1) | |||||||||
| Russia: | 263 | 1.9 | |||||||||
| Other Foreign Jurisdictions | 388 | 2.8 | |||||||||
| Effect of Cross-Border Tax Laws | 67 | 0.5 | |||||||||
| Nontaxable/Nondeductible Items | (17) | (0.1) | |||||||||
| Valuation Allowances | 519 | 3.8 | |||||||||
| Other | |||||||||||
| Foreign Exchange | (384) | (2.8) | |||||||||
| Deferred Taxes on Canadian Equity Investment | (343) | (2.5) | |||||||||
| Other | (232) | (1.7) | |||||||||
| Consolidated tax expense / effective tax rate | $ | 2,737 | 19.7 | % | |||||||
*State taxes in California, Kentucky, Michigan, New York, Pennsylvania and Wisconsin, made up the majority (greater than 50 percent) of the tax effect in the State and Local income tax category above.
The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| Increase (decrease) resulting from: | |||||||||||
| Foreign rate differences | (1.6) | (1.0) | |||||||||
| Dividend repatriation cost | 0.6 | 0.7 | |||||||||
| Global intangible low-taxed income | 1.7 | 2.0 | |||||||||
| U.S. state taxes | 0.6 | (0.1) | |||||||||
| Foreign derived intangible income | (0.7) | (0.9) | |||||||||
| Foreign exchange | 1.7 | (1.6) | |||||||||
| Non-deductible goodwill impairment | — | 1.3 | |||||||||
| Unremitted earnings of Russian subsidiaries | 0.6 | 1.7 | |||||||||
| Fair value adjustment of equity securities | 1.1 | 0.1 | |||||||||
| Other | (0.3) | (0.8) | |||||||||
| Effective tax rate | 24.7 | % | 22.4 | % | |||||||
The 2025 effective tax rate decreased 5.0 percentage points to 19.7%. The effective tax rate for 2025 was favorably impacted by: (i) a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings ($384 million), while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, (ii) benefits related to an interest expense election primarily driven by a reduction in tax costs
associated with global intangible low-taxed income (including $174 million for 2024) and (iii) refunds expected on amended tax returns filed in Germany ($89 million); partially offset by: (i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($81 million), (ii) tax impacts of the RBH (Canada) Plan Implementation ($166 million), (iii) valuation allowances recorded on deferred tax assets related to U.S. foreign tax credits ($50 million), and (iv) the recognition of current tax expense related to the potential disallowance of intercompany transactions in Indonesia ($39 million). For further details on the RBH (Canada) Plan Implementation, see Note 5. Related Parties - Equity Investments and Other.
The 2024 effective tax rate increased 2.3 percentage points to 24.7%. The effective tax rate for 2024 was unfavorably impacted by: (i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI; (ii) U.S. state taxes; and (iii) a deferred tax charge for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, partially offset by: (i) a lower deferred tax charge in 2024 related to the unremitted earnings of PMI's Russian subsidiaries as compared to the 2023 charge following the suspension of certain double tax treaties; (ii) the non-deductible Wellness goodwill impairment charge recorded in 2023; and (iii) a U.S. tax benefit for a worthless stock deduction under section 165(g) of the Internal Revenue Code related to PMI's investment in C.A. Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela. For further details on PMI's ceased operations in Venezuela and the impairment loss related to the sale of Vectura Group, see Note 18. Restructuring Activities and Note 3. Acquisitions and Divestitures, respectively.
The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following:
| At December 31, | |||||||||||
(in millions) | 2025 | 2024 | |||||||||
| Deferred income tax assets: | |||||||||||
| Accrued postretirement and postemployment benefits | $ | 227 | $ | 208 | |||||||
| Accrued pension costs | 189 | 384 | |||||||||
| Inventory | 47 | 40 | |||||||||
| Accrued liabilities | 212 | 213 | |||||||||
| Net operating loss, tax credit, and other carryforwards | 1,542 | 912 | |||||||||
| Investments in equity interests | 810 | 507 | |||||||||
| Foreign exchange | 451 | — | |||||||||
| Other | 325 | 62 | |||||||||
| Total deferred income tax assets | 3,803 | 2,326 | |||||||||
| Less: valuation allowance | (1,709) | (1,130) | |||||||||
| Deferred income tax assets, net of valuation allowance | 2,094 | 1,196 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Intangible assets | (1,936) | (1,862) | |||||||||
| Property, plant and equipment | (165) | (152) | |||||||||
| Unremitted earnings | (811) | (495) | |||||||||
| Foreign exchange | — | (264) | |||||||||
| Other | — | — | |||||||||
Total deferred income tax liabilities | (2,912) | (2,773) | |||||||||
| Net deferred income tax assets (liabilities) | $ | (818) | $ | (1,577) | |||||||
At December 31, 2025, PMI recorded deferred tax assets for net operating loss, tax credit, and other carryforwards of $1,542 million, with varying dates of expiration, primarily after 2031, including $961 million with an unlimited carryforward period. At December 31, 2025, PMI has recorded a valuation allowance of $1,709 million against deferred tax assets that do not meet the more-likely-than not recognition threshold.
At December 31, 2024, PMI recorded deferred tax assets for net operating loss, tax credit, and other carryforwards of $912 million, with varying dates of expiration, primarily after 2029, including $381 million with an unlimited carryforward period. At December 31, 2024, PMI has recorded a valuation allowance of $1,130 million against deferred tax assets that do not meet the more-likely-than-not recognition threshold.
Disclosed below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025:
(in millions) | 2025 | ||||
| Income tax payments (net of refunds): | |||||
| United States: | |||||
| U.S. Federal | $ | 797 | |||
| U.S. State and Local | 107 | ||||
| Total United States | 904 | ||||
| Foreign: | |||||
| Switzerland | 929 | ||||
| Russia | 348 | ||||
| Italy | 301 | ||||
| Other | 1,370 | ||||
| Total Foreign | 2,948 | ||||
| Total | $ | 3,852 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 6, 2026 | Showing above |
| 2024 | Feb 6, 2025 | |
| 2023 | Feb 8, 2024 | |
| 2022 | Feb 10, 2023 | |
| 2021 | Feb 11, 2022 | |
| 2020 | Feb 9, 2021 | |
| 2019 | Feb 7, 2020 | |
| 2018 | Feb 7, 2019 | |
| 2017 | Feb 13, 2018 | |
| 2016 | Feb 14, 2017 | |
| 2015 | Feb 17, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.