INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES |
NOTE 11 - INCOME TAXES
The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates and will be updated if the tax rate changes before the expected reversal dates. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.
The provision (benefit) for income taxes comprises:
CODA OCTOPUS GROUP, INC. Notes to the Consolidated Financial Statements October 31, 2024 and 2023
The expense for income taxes differed from the U.S. statutory rate due to the following:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s deferred tax assets and liabilities are as follows:
As of October 31, 2024, we had no remaining U.S. federal net operating loss (NOL) carryforwards.
The Company’s tax jurisdictions are USA, UK, Denmark, India, and Australia (our India and Australian operations are currently dormant). As a result, the Company’ foreign derived income is subject to GILTI tax in the United States. The Company has elected to treat GILTI inclusions as period costs.
The Company has filed tax returns for federal, state, and foreign jurisdictions. The Company’s evaluation of uncertain tax matters was performed for the tax years ended October 31, 2024, and October 31, 2023. The Company has elected to retain its existing accounting policy with respect to the treatment of interest and penalties attributable to income taxes and continues to reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of its income tax provision or benefit as well as its outstanding income tax assets and liabilities. The Company believes that its income tax positions and deductions would be sustained upon audit and does not anticipate any adjustments to result in a material change to its financial position.
The Company’s UK Operations, under the applicable UK tax rules, have certain carryforward trading losses (referred to in this Form 10-K disclosure as “UK NOLs”). Under the applicable UK tax rules, any trading tax losses incurred from 2017 up to and including the current fiscal year can be surrendered for group relief (between and among the Company’s “UK companies”) to offset or reduce current year tax liability relating to any of the UK companies. Any UK NOLs arising before 2017 in a UK company can only be used by the UK company to which it pertains (and cannot be used within the UK tax group). The benefit of these UK NOLs is available indefinitely unless the nature of the business with the tax benefit changes substantially. Under UK tax rules, the UK entities are also eligible for research and development (R&D) Tax Credit. The UK Marine Technology Business in any one financial year performs significant R&D work due to the nature of its business (researching and developing products and solutions) and typically receives R&D allowance. In the 2024 FY our UK R&D allowance was insufficient to completely eliminate tax liability and as such we have recorded an income tax provision for UK entities of $267,759 for 2024 FY, compared to $0 for 2023 FY, where we were able to offset all tax liability by applying our R&D allowance. Our UK Operations have the equivalent of $386,788 in NOL carryforwards which under the applicable rules can only be used by the entity in which the loss occurred and therefore is not available for the broader abatement of tax liability of the UK tax group. The new UK products business, PAL, also performs significant R&D work and prior to the acquisition, historically it benefited from UK R&D Tax Credit. PAL will also be included in our UK tax group and will be eligible, where applicable to use any available UK NOLs to offset tax obligation, if available
CODA OCTOPUS GROUP, INC. Notes to the Consolidated Financial Statements October 31, 2024 and 2023
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