Viatris IncVTRS
Viatris Inc Income Taxes Disclosure
Income Taxes
The income tax (benefit) provision consisted of the following components:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. Federal: | |||||||||||||||||
| Current | $ | (109.4) | $ | 113.0 | $ | 2.6 | |||||||||||
| Deferred | (301.7) | (113.2) | 293.4 | ||||||||||||||
| (411.1) | (0.2) | 296.0 | |||||||||||||||
| U.S. State: | |||||||||||||||||
| Current | (5.7) | 7.2 | 1.9 | ||||||||||||||
| Deferred | 0.8 | (7.2) | 2.6 | ||||||||||||||
| (4.9) | — | 4.5 | |||||||||||||||
| Non-U.S.: | |||||||||||||||||
| Current | 441.5 | 658.4 | 530.8 | ||||||||||||||
| Deferred | (175.6) | (647.2) | (683.1) | ||||||||||||||
| 265.9 | 11.2 | (152.3) | |||||||||||||||
| Income tax (benefit) provision | $ | (150.1) | $ | 11.0 | $ | 148.2 | |||||||||||
| (Loss) earnings before income taxes: | |||||||||||||||||
| United States | (1,754.1) | (571.9) | (951.5) | ||||||||||||||
| Foreign - Other | (1,910.9) | (51.3) | 1,154.4 | ||||||||||||||
| Total (loss) earnings before income taxes | $ | (3,665.0) | $ | (623.2) | $ | 202.9 | |||||||||||
For all periods presented, the allocation of earnings before income taxes between U.S. and non-U.S. operations includes intercompany interest allocations between certain domestic and foreign subsidiaries. These amounts are eliminated on a consolidated basis.
Temporary differences and carry-forwards that result in deferred tax assets and liabilities were as follows:
| (In millions) | December 31, 2025 | December 31, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Employee benefits | $ | 122.3 | $ | 138.5 | |||||||
| Litigation reserves | 99.8 | 79.6 | |||||||||
| Accounts receivable allowances | 340.7 | 392.2 | |||||||||
| Inventory | 130.9 | 129.3 | |||||||||
| Tax credit and loss carry-forwards | 1,609.7 | 1,482.9 | |||||||||
| Operating lease assets | 57.3 | 50.8 | |||||||||
| Interest expense | 131.9 | 96.8 | |||||||||
| Intangible assets | 361.5 | 241.7 | |||||||||
| Other | 295.2 | 273.5 | |||||||||
| 3,149.3 | 2,885.3 | ||||||||||
| Less: Valuation allowance | (1,436.6) | (1,233.4) | |||||||||
| Total deferred tax assets | 1,712.7 | 1,651.9 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Plant and equipment | 57.7 | 56.3 | |||||||||
| Operating lease liabilities | 57.3 | 50.8 | |||||||||
| Intangible assets and goodwill | 1,296.9 | 1,695.8 | |||||||||
| Equity investments | 46.1 | 164.6 | |||||||||
| Other | 85.5 | 39.3 | |||||||||
| Total deferred tax liabilities | 1,543.5 | 2,006.8 | |||||||||
| Deferred tax liabilities, net | $ | 169.2 | $ | (354.9) | |||||||
For those foreign subsidiaries whose investments are permanent in duration, income and foreign withholding taxes have not been provided on the unremitted earnings of those subsidiaries. This amount may become taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. Determination of the amount of any unrecognized deferred income tax liability on these unremitted earnings is not practicable as such determination involves material uncertainties about the potential extent and timing of any distributions, the availability and complexity of calculating foreign tax credits, and the potential indirect tax consequences of such distributions, including withholding taxes.
A reconciliation of the U.S. statutory federal income tax rate of 21.0% to our effective tax rate from continuing operations after the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | ||||||||
| 2025 | ||||||||
(In millions, except %s) | Amount | Percent | ||||||
| U.S. federal statutory tax rate | $ | (769.7) | 21.0 | % | ||||
Statutory and local income taxes, net of federal income tax effect (a) | (2.7) | 0.1 | % | |||||
| Foreign tax effects: | ||||||||
| Italy | ||||||||
| Nondeductible goodwill impairment | 138.1 | (3.8) | % | |||||
| Other | (4.9) | 0.1 | % | |||||
| Ireland | ||||||||
| Valuation allowance | 89.9 | (2.5) | % | |||||
| Other | (13.6) | 0.4 | % | |||||
| Sweden | ||||||||
| Nondeductible goodwill impairment | 99.1 | (2.7) | % | |||||
| Other | (3.0) | 0.1 | % | |||||
| Singapore | ||||||||
| Nontaxable income | (56.9) | 1.6 | % | |||||
| Impact of incentive rates | (84.8) | 2.3 | % | |||||
| Nondeductible goodwill impairment | 36.6 | (1.0) | % | |||||
| Other | (2.4) | 0.1 | % | |||||
| Switzerland | ||||||||
| Statutory rate difference | 39.6 | (1.1) | % | |||||
| Withholding taxes | 61.5 | (1.7) | % | |||||
| Other | (5.0) | 0.1 | % | |||||
| India | ||||||||
| Changes in valuation allowance | 111.5 | (3.0) | % | |||||
| Other | (19.0) | 0.5 | % | |||||
| Puerto Rico | ||||||||
| Statutory rate difference | 40.1 | (1.1) | % | |||||
| Impacts of incentive rates | (85.0) | 2.3 | % | |||||
| Other | 0.6 | — | % | |||||
| Luxembourg | 51.8 | (1.4) | % | |||||
| Canada | 42.8 | (1.2) | % | |||||
| France | 41.6 | (1.1) | % | |||||
| Other foreign jurisdictions | 168.4 | (4.6) | % | |||||
| Effect of cross-border tax laws: | ||||||||
| Global intangible low tax income, net of tax credits | 48.6 | (1.3) | % | |||||
| Subpart F, net of tax credits | 33.4 | (0.9) | % | |||||
| Branch impacts, inclusive of tax credits | (117.0) | 3.2 | % | |||||
| Other | (5.7) | 0.2 | % | |||||
| Tax credits: | ||||||||
| Research and development tax credits | (8.0) | 0.2 | % | |||||
| Changes in valuation allowance | (84.5) | 2.3 | % | |||||
| Nontaxable or nondeductible items: | ||||||||
| Nondeductible goodwill impairment | 75.3 | (2.1) | % | |||||
| Other Items | 32.0 | (0.9) | % | |||||
Changes in unrecognized tax benefits (b) | 19.9 | (0.5) | % | |||||
| Other adjustments | (18.7) | 0.5 | % | |||||
| Effective tax rate | $ | (150.1) | 4.1 | % | ||||
____________
(a)State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
(b)Includes interest and penalty accruals and reversals.
A reconciliation of the U.S. statutory federal income tax rate of 21.0% to our effective tax rate from continuing operations for the years prior to the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory tax rate | 21.0 | % | 21.0 | % | |||||||
| Research credits | 2.2 | % | (5.2) | % | |||||||
| Foreign rate differential | 11.2 | % | (58.8) | % | |||||||
| Recognition of tax carryforwards | 114.7 | % | 1.5 | % | |||||||
| Goodwill impairment | (10.7) | % | 60.8 | % | |||||||
| State income taxes and credits | (0.2) | % | (3.9) | % | |||||||
| Tax settlements and resolution of certain tax positions | (2.6) | % | 14.2 | % | |||||||
| Impact of the Combination and divestitures | 5.5 | % | 11.2 | % | |||||||
| Incremental U.S. tax on foreign earnings | 9.9 | % | 69.4 | % | |||||||
| Valuation allowance | (137.0) | % | 10.9 | % | |||||||
| Deferred tax impact of tax law changes | 0.7 | % | (1.0) | % | |||||||
| Withholding taxes | (4.3) | % | 7.4 | % | |||||||
| Deferred tax impact of internal restructuring | (8.3) | % | (74.0) | % | |||||||
| Other items | (3.9) | % | 19.5 | % | |||||||
| Effective tax rate | (1.8) | % | 73.0 | % | |||||||
In all years, our effective tax rate is impacted by the jurisdictional location of earnings and the corresponding tax rates in those jurisdictions. The Company realizes benefits from lower tax rates in Singapore and Puerto Rico due to manufacturing and other incentives.
During the year ended December 31, 2024, as a result of legislation changes surrounding Pillar Two Global Anti-Base Erosion Rules (“Pillar Two Rules”), the Company recognized $734.6 million of previously unrecorded Luxembourg net operating losses which are offset by a corresponding valuation allowance.
Valuation Allowance
A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2025, a valuation allowance has been applied to certain deferred tax assets in the amount of $1.44 billion.
When assessing the realizability of deferred tax assets, management considers all available evidence, including historical information, long-term forecasts of future taxable income and possible tax planning strategies. Amounts recorded for valuation allowances can result from a complex series of estimates, assumptions and judgments about future events. Due to the inherent uncertainty involved in making these estimates, assumptions and judgments, actual results could differ materially. Any future increases to the Company’s valuation allowances could materially impact the Company’s consolidated financial condition and results of operations.
Net Operating Losses
As of December 31, 2025, the Company had the following carryforwards and attributes:
•U.S. federal net operating loss carryforwards of $214.6 million, which were recorded in connection with the Oyster Point acquisition. While the utilization of these carryforwards is subject to Section 382 of the Code, the Company does not anticipate that this limitation will impair our ability to utilize the carryovers.
•U.S. state income tax loss carryforwards of approximately $3.50 billion, which are largely offset by a valuation allowance.
•Non-U.S. net operating loss carryforwards of approximately $4.84 billion, of which $2.24 billion can be carried forward indefinitely, with the remaining $2.60 billion expiring in years 2026 through 2045.
•U.S. and foreign credit carryovers of $307.2 million, expiring in various amounts through 2043.
•Anticipatory foreign tax credits of $24.3 million which will generate from the reversal of future taxable income in certain non-U.S. jurisdictions which are taxed both in their local jurisdictions and in the U.S.
On November 16, 2020, the Company had a change in ownership pursuant to Section 382 of the Code. Under this provision of the Code, the utilization of any NOL or tax credit carryforwards incurred prior to the date of ownership change may be limited. Analyses of the limits for each ownership change indicates the annual limitation would not impair the Company's ability to utilize our U.S. federal credit carryovers. While state loss carryforwards may be limited by Section 382 of the Code, the carryforwards are largely offset by a valuation allowance.
Legislative Updates
On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act (“OBBBA”), which contains a broad range of tax reform provisions affecting businesses, including permanent extensions of most expiring Tax Cuts and Jobs Act provisions and international tax changes. The OBBBA did not have a significant impact on the Company’s provision for income taxes and deferred tax assets for the year ended December 31, 2025. We will continue to evaluate the full impact of these legislative changes as additional guidance becomes available.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 into law, which includes a new corporate alternative minimum tax (“CAMT”) and an excise tax of 1% on the fair market value of net stock repurchases. Both provisions are effective for years after December 31, 2022. The Company reflected the applicable estimated excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability in Other current liabilities in our consolidated balance sheets as of December 31, 2025 and 2024. The share repurchase and authorization amounts otherwise disclosed in this Form 10-K exclude the excise tax. The Company does not anticipate being subject to the 15% CAMT tax in 2025 based on enacted law and regulatory guidance; however, its CAMT status could change in the future, depending on new regulations or regulatory guidance issued by the U.S. Department of the Treasury, including with respect to the OBBBA.
In addition, many countries are actively considering or have proposed or enacted changes to their tax laws based on the Pillar Two Rules proposed by the OECD. The Pillar Two Rules impose a global minimum tax of 15%, and under these rules, the Company may be required to pay a “top-up” tax to the extent our effective tax rate in any given country is below 15%. Several countries have enacted the Pillar Two Rules effective January 1, 2024, with many countries postponing implementation to January 1, 2025 or later, if at all. After determining which jurisdictions are not required to calculate a Pillar Two liability as a result of the existing safe harbors, the Company has determined that while the impact of the Pillar Two Rules in the countries that have enacted such rules effective for tax years ending on or before December 31, 2025 did increase its effective tax rate, the impact is not material to its results for the year ended December 31, 2025. The Company will continue to monitor and evaluate the evolving tax legislation in the jurisdictions in which it operates which could impact future tax provision and financial results, such as the Side-by-Side (“SbS”) package announced by the OECD on January 5, 2026. The package introduces simplifications and new safe harbors for U.S. and other multinational companies where domestic and international tax systems meet robust requirements to coexist with Pillar Two which would fully exempt U.S. parented groups from the application of two of the three Pillar Two top up taxes and also extends the current Transitional Country-by-Country Reporting (CbCR) Safe Harbor by one year, through the end of fiscal year of 2027.
Tax Examinations
The Company is subject to income taxes and tax audits in many jurisdictions. A certain degree of estimation is thus required in recording the assets and liabilities related to income taxes. Tax audits and examinations can involve complex issues, interpretations, and judgments and the resolution of matters that may span multiple years, particularly if subject to litigation or negotiation.
Although the Company believes that adequate provisions have been made for these uncertain tax positions, the Company’s assessment of uncertain tax positions, including those arising from legal entity restructuring transactions in connection with the Combination, is based on estimates and assumptions that the Company believes are reasonable but the
estimates for unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variations from such estimates could materially affect the Company’s financial condition, results of operations or cash flows in the period of resolution, settlement or when the statutes of limitations expire.
The Company is subject to ongoing IRS examinations. The years 2020 through 2024 are open years, with 2020 and 2021 under examination.
Several international audits are currently in progress. In some cases, the tax auditors have proposed adjustments or issued assessments to our tax positions, including with respect to intercompany transactions, and we are in ongoing discussions with some of the auditors regarding the validity of their tax positions.
In instances where assessments have been issued, we disagree with these assessments and believe they are without merit and incorrect as a matter of law. As a result, we anticipate that certain of these matters may become the subject of litigation before tax courts where we intend to vigorously defend our position.
In Australia, the tax authorities issued notices of assessments to the Company for the years ended December 2009 to December 2020, subject to additional interest and penalties, concerning our tax position with respect to certain intercompany transactions. The tax authorities denied our objections to the assessments for the years ended December 2009 to December 2020 and we commenced litigation in the Australian Federal Court challenging those decisions. A trial took place in October 2023 and on March 20, 2024, the Court issued a decision in favor of the Company. The tax authorities did not appeal the Court decision. The Company made a partial payment of $56.0 million in 2021 and $5.2 million in 2022 in order to stay potential interest and penalties resulting from this litigation, which was refunded in 2024.
In France, the tax authorities issued notices of assessments to the Company for the years ended December 2013 to December 2015 concerning our tax position with respect to whether income earned by a Company entity not domiciled in France should be subject to French tax. We commenced litigation before the French tax courts where the tax authorities are seeking unpaid taxes, penalties, and interest. In February 2026, the first instance tax court upheld the Company’s tax position and fully cancelled the notices of assessment.
In India, the tax authorities have issued notices of assessments to the Company seeking unpaid taxes and interest for the financial years covering 2013 to 2018 concerning our tax position with respect to certain corporate tax deductions and certain intercompany transactions. Some of these issues were resolved through the Company entering into an agreement with the tax authorities in March 2023 in respect of the pricing of its international transactions. The Company recorded tax expense of approximately $22.3 million during the year ended December 31, 2023, due to the terms of this agreement. The remaining issues are in the audit phase or are being challenged in the Indian tax courts.
In Italy, the tax authorities have issued notices of assessments to the Company for the years ended December 2016 to December 2018, seeking unpaid taxes, penalties, and interest, concerning our tax position with respect to certain intercompany transactions. We have commenced litigation before the Italian tax courts challenging those assessments and, to date, the Company’s position has been upheld, subject to further appeal by the tax authorities.
In 2020, the Swedish Tax Authorities (“STA”) asserted an underpayment of tax against Meda A.B. for the tax years 2014 to 2019. The claim was that profits earned by its Luxembourg subsidiary should have been attributed to Meda A.B. The Company appealed the STA’s assessment to the Administrative Court of Stockholm. On September 16, 2022, the Court ruled in favor of Meda A.B. that no tax was due. The STA appealed that decision. On April 10, 2024, the Administrative Court of Appeals overturned the lower Court’s ruling and issued a decision in favor of the STA upholding its original assessment. The amount due including interest and penalties is approximately $18.2 million, which was paid during the second quarter of 2024. The Company’s petition seeking review of the decision to the Supreme Administrative Court was denied and this matter is now closed.
The Company has recorded a net reserve for uncertain tax positions of $293.6 million and $277.0 million, including interest and penalties, in connection with its international audits at December 31, 2025 and 2024, respectively. In connection with our international tax audits, it is possible that we will incur material losses above the amounts reserved.
The Company’s major U.S. state taxing jurisdictions remain open from fiscal year 2015 through 2024, with several state audits currently in progress. The Company’s major international taxing jurisdictions remain open from 2013 through 2024.
Accounting for Uncertainty in Income Taxes
The impact of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained.
As of December 31, 2025 and 2024, the Company’s consolidated balance sheets reflect net liabilities for unrecognized tax benefits of $263.2 million and $255.7 million, respectively, of which $192.9 million as of December 31, 2025 would affect the Company’s effective tax rate if recognized, with the remainder being offset by potential correlative adjustments. Related accrued interest and penalties included in the consolidated balance sheets were $110.5 million and $106.4 million as of December 31, 2025 and 2024, respectively. For the years ended December 31, 2025, 2024 and 2023, the Company recognized $6.2 million, $(0.3) million, and $15.4 million of tax expense/(benefit), respectively, related to interest and penalties on uncertain tax positions. Interest and penalties related to income taxes are included in the .
A reconciliation of the unrecognized tax benefits is as follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Unrecognized tax benefit — beginning of year | $ | 255.7 | $ | 272.8 | $ | 296.7 | |||||||||||
| Additions for current year tax positions | 20.3 | 22.5 | — | ||||||||||||||
| Additions for prior year tax positions | 24.5 | 33.8 | 3.0 | ||||||||||||||
| Reductions for prior year tax positions | (8.8) | (34.6) | (4.6) | ||||||||||||||
| Settlements | (19.1) | (15.6) | (2.1) | ||||||||||||||
| Reductions due to expirations of statute of limitations | (19.0) | (13.4) | (13.0) | ||||||||||||||
| Impact of foreign currency translation | 9.6 | (9.8) | (7.2) | ||||||||||||||
| Unrecognized tax benefit — end of year | $ | 263.2 | $ | 255.7 | $ | 272.8 | |||||||||||
Cash Taxes Paid
The amounts of cash income taxes paid (net of refunds received) by the Company were as follows:
| Year Ended December 31, | |||||
| (In millions) | 2025 | ||||
| Federal | $ | 101.0 | |||
| State and local | 3.2 | ||||
| Foreign: | |||||
| China | 131.5 | ||||
| Ireland | (46.9) | ||||
| France | 34.5 | ||||
| Switzerland | 31.7 | ||||
| Italy | 22.6 | ||||
| All other foreign | 167.8 | ||||
Total cash taxes paid (net of refunds received) | $ | 445.4 | |||
The amount of cash income taxes paid by the Company during the years ended December 31, 2024 and 2023 was $514.0 million and $570.9 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 1, 2021 | |
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.