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INCOME TAXES | 12 Months Ended
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Jun. 30, 2026
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company’s effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a wide range of income tax rates. The Company adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis beginning with the year ended June 30, 2026. A reconciliation of Canadian federal income tax rate with our effective income tax rate is as follows:
| Year Ended June 30, 2026
| Amount |  | %
Expected income tax expense at Canadian Federal statutory income tax rate (1) |  |  |
Canadian Federal tax | $ | 128,832 |  |  | 15.0 | %
Canadian Provincial tax (2) | 33,530 |  |  | 3.9 | %
Foreign tax effects |  |  |
United States |  |  |
Effect of foreign tax rate differences | 7,794 |  |  | 0.9 | %
Net controlled foreign corporation tested income (NCTI) | 14,913 |  |  | 1.7 | %
Foreign-derived deduction-eligible income (FDDEI) | (8,670) |  |  | (1.0) | %
Effect of foreign tax credits | (27,687) |  |  | (3.2) | %
Includable foreign income | 16,004 |  |  | 1.9 | %
Impact of reorganizations | 12,790 |  |  | 1.5 | %
Other items | 11,552 |  |  | 1.3 | %
United Kingdom |  |  |
Effect of foreign tax rate differences | 6,356 |  |  | 0.7 | %
Includable foreign deductions | (19,534) |  |  | (2.3) | %
Difference in tax filing positions from provision | 6,450 |  |  | 0.8 | %
Impact of reorganizations | 9,170 |  |  | 1.1 | %
Change in valuation allowance | 6,769 |  |  | 0.8 | %
Other items | 271 |  |  | — | %
Other foreign jurisdictions | 56,630 |  |  | 6.6 | %
Effect of changes in unrecognized tax benefits | (16,126) |  |  | (1.9) | %
Other items | (23,430) |  |  | (2.7) | %
Provision for income taxes | $ | 215,614 |  |  | 25.1 | %
______________________ (1)This represents the Canadian federal statutory income tax rate, which is 15% after a 13% general tax reduction and 10% federal abatement are applied to the 38% basic rate. (2)Provincial taxes are primarily Ontario. A reconciliation of the combined Canadian federal and provincial income tax rate with our effective income tax rate for the years ended June 30, 2025 and 2024 were as follows:
| Year Ended June 30,
| 2025 |  | 2024
Expected statutory rate | 26.50 | % |  | 26.50 | %
Expected provision for income taxes | $ | 127,749 |  |  | $ | 193,263 |
Effect of foreign tax rate differences | (9,275) |  |  | (18,338) |
Change in valuation allowance | (4,040) |  |  | 71,328 |
Effect of permanent differences | 24,908 |  |  | 11,864 |
Effect of changes in unrecognized tax benefits | (32,387) |  |  | (4,570) |
Effect of withholding taxes | 7,479 |  |  | 18,680 |
Effect of tax credits | (55,656) |  |  | (84,244) |
Effect of accrual for undistributed earnings | 4,072 |  |  | (12,421) |
Effect of U.S. BEAT | — |  |  | 17,927 |
Difference in tax filing positions from provision | (37,053) |  |  | (2,661) |
Impact of internal reorganizations | 5,037 |  |  | 59,761 |
Other items | 15,171 |  |  | 13,423 |
Provision for income taxes | $ | 46,005 |  |  | $ | 264,012 |
The Company adopted ASU 2023-09 on a prospective basis for the year ended June 30, 2026 and has included the following table as a result of adoption, which presents income taxes paid (net of refunds received) disaggregated by individual jurisdiction in which income taxes paid (net of refunds received) was greater than or equal to 5% of total income taxes paid (net of refunds received). For the years ended June 30, 2025 and 2024, see Note 22 “Supplemental Cash Flow Disclosures” for cash paid for income taxes.
| Year Ended June 30,
| 2026
Federal | $ | 35,485 |
Provincial | 17,996 |
Foreign |
United States | 134,297 |
United Kingdom | 15,519 |
Germany | 22,363 |
India | 16,251 |
Other foreign jurisdictions | 58,151 |
Total cash paid for income taxes, net | $ | 300,062 |
The following is a geographical breakdown of income before the provision for income taxes:
| Year Ended June 30,
| 2026 |  | 2025 |  | 2024
Domestic income (loss) | $ | 361,295 |  |  | $ | 248,942 |  |  | $ | 359,865 |
Foreign income (loss) | 497,582 |  |  | 233,129 |  |  | 369,431 |
Income before income taxes | $ | 858,877 |  |  | $ | 482,071 |  |  | $ | 729,296 |
The Company adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis beginning with the year ended June 30, 2026. The provision for (recovery of) income taxes consisted of the following:
| Year Ended June 30,
| 2026
Current income taxes (recoveries): |
Federal | $ | 30,508 |
Provincial | 6,089 |
Foreign | 205,219 |
Total current income taxes (recoveries) | 241,816 |
Deferred income taxes (recoveries): |
Federal | 2,229 |
Provincial | 27,441 |
Foreign | (55,872) |
Total deferred income taxes (recoveries) | (26,202) |
Provision for income taxes | $ | 215,614 |
The provision for (recovery of) income taxes for the years ended June 2025 and June 2024 consisted of the following:
| Year Ended June 30,
| 2025 |  | 2024
Current income taxes (recoveries): |  |  |
Domestic | $ | 13,769 |  |  | $ | 76,571 |
Foreign | 170,852 |  |  | 329,712 |
Total current income taxes (recoveries) | 184,621 |  |  | 406,283 |
Deferred income taxes (recoveries): |  |  |
Domestic | 44,974 |  |  | 17,205 |
Foreign | (183,590) |  |  | (159,476) |
Total deferred income taxes (recoveries) | (138,616) |  |  | (142,271) |
Provision for income taxes | $ | 46,005 |  |  | $ | 264,012 |
The primary components of the deferred tax assets and liabilities are as follows, for the periods indicated below:
| As of June 30,
| 2026 |  | 2025
Deferred tax assets |  |  |
Non-capital loss carryforwards | $ | 644,940 |  |  | $ | 676,446 |
Capital loss carryforwards | 2,756 |  |  | 5,833 |
Interest expense carryforwards | 141,873 |  |  | 230,658 |
Capitalized scientific research and development expenses | 493,177 |  |  | 451,163 |
Restructuring costs and other reserves | 16,741 |  |  | 18,678 |
Capitalized inventory and intangible expenses | 151,081 |  |  | 123,010 |
Tax credits | 159,914 |  |  | 179,343 |
Lease liabilities | 26,568 |  |  | 36,975 |
Deferred revenue | 54,224 |  |  | 22,759 |
Share-based compensation | 31,717 |  |  | 40,464 |
Derivatives | 57,099 |  |  | 73,074 |
Other | 66,832 |  |  | 62,799 |
Total deferred tax asset | 1,846,922 |  |  | 1,921,202 |
Valuation allowance | (620,736) |  |  | (651,779) |
Deferred tax liabilities |  |  |
Depreciation and amortization | (190,713) |  |  | (247,606) |
Right of use assets | (13,329) |  |  | (22,754) |
Other | (84,755) |  |  | (60,002) |
Deferred tax liabilities | (288,797) |  |  | (330,362) |
Net deferred tax asset | $ | 937,389 |  |  | $ | 939,061 |
Comprised of: |  |  |
Long-term assets | 1,077,003 |  |  | 1,080,575 |
Long-term liabilities | (139,614) |  |  | (141,514) |
Net deferred tax asset | $ | 937,389 |  |  | $ | 939,061 |
As of June 30, 2026, we have $332.8 million of domestic non-capital loss carryforwards. In addition, we have $2.6 billion of foreign non-capital loss carryforwards, which includes $406.6 million of U.S. state loss carryforwards. $270.0 million of the foreign non-capital loss carryforwards have no expiry date, which includes $62.7 million of U.S. state loss carryforwards. The remainder of the domestic and foreign losses expire between 2027 and 2044. In addition, investment tax credits of $84.6 million will expire between 2029 and 2046. We believe that sufficient uncertainty exists regarding the realization of certain deferred tax assets that a valuation allowance is required. We continue to evaluate our taxable position quarterly and consider factors by taxing jurisdiction, including but not limited to factors such as estimated taxable income, any historical experience of losses for tax purposes and the future growth of OpenText. As of June 30, 2026 and 2025, the Company had a valuation allowance on its domestic and foreign deferred tax assets of $620.7 million and $651.8 million, respectively. The balance as of June 30, 2026 consisted of $2.9 million and $617.8 million against the Company’s domestic and foreign deferred tax assets, respectively, which, the Company believes, are more likely than not to be utilized in future years. The valuation allowance decreased in Fiscal 2026 by $31.0 million primarily related to utilization of interest carryovers and expiration of net operating loss carryovers. The aggregate changes in the balance of our gross unrecognized tax benefits (including interest and penalties) were as follows:
Unrecognized tax benefits as of June 30, 2024 | $ | 180,365 |
Increases on account of current year positions | — |
Increases on account of prior year positions | 8,024 |
Decreases on account of prior year positions | (2,612) |
Decreases due to settlements with tax authorities | (9,569) |
Decreases due to lapses of statutes of limitations | (36,417) |
Unrecognized tax benefits as of June 30, 2025 | 139,791 |
Increases on account of current year positions | 2,607 |
Increases on account of prior year positions | 5,609 |
Decreases on account of prior year positions | (3,609) |
Decreases due to settlements with tax authorities | (3,502) |
Decreases due to lapses of statutes of limitations | (19,560) |
Unrecognized tax benefits as of June 30, 2026 | $ | 121,336 |
Included in the above tabular reconciliation are unrecognized tax benefits of $54.7 million as of June 30, 2026 (June 30, 2025—$56.0 million) relating to tax attributes in which the unrecognized tax benefit has been recorded as a reduction to the deferred tax asset. The net unrecognized tax benefit excluding these deferred tax assets is $66.7 million as of June 30, 2026 (June 30, 2025—$83.8 million). We recognize interest expense and penalties related to income tax matters in income tax expense. For the years ended June 30, 2026, 2025 and 2024, respectively, we recognized the following amounts as income tax-related interest expense and penalties:
| Year Ended June 30,
| 2026 |  | 2025 |  | 2024
Interest expense (income) | $ | (4,105) |  |  | $ | (5,290) |  |  | $ | 7,778 |
Penalties expense | (704) |  |  | (2,175) |  |  | 964 |
Total | $ | (4,809) |  |  | $ | (7,465) |  |  | $ | 8,742 |
The following amounts have been accrued on account of income tax-related interest expense and penalties:
| As of June 30, 2026 |  | As of June 30, 2025
Interest expense accrued (1) | $ | 10,581 |  |  | $ | 14,686 |
Penalties accrued (1) | $ | 1,471 |  |  | $ | 2,121 |
______________________ (1)These balances are primarily included within Long-term income taxes payable within the Consolidated Balance Sheets. We are subject to income tax audits in all major taxing jurisdictions in which we operate. Our four most significant tax jurisdictions are Canada, the United States, the United Kingdom and Germany. Our tax filings remain subject to audits by applicable tax authorities for a certain length of time following the tax year to which those filings relate. We currently have income tax audits open in Canada, the United States, the United Kingdom, Germany and other immaterial jurisdictions. The earliest fiscal years open for examination for our major jurisdictions are 2012 for Canada, 2022 for the United States, 2017 for the United Kingdom and 2017 for Germany. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. Statements regarding the Canada audits are included in Note 14 “Guarantees and Contingencies.” The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For more information relating to certain income tax audits, refer to Note 14 “Guarantees and Contingencies.” On July 4, 2025, the One Big Beautiful Bill Act (the OBBBA) was enacted, introducing amendments to U.S. tax laws with various effective dates. Key income tax-related provisions of the OBBBA include provisions related to bonus depreciation, research and development expenditures, interest expense deductibility, and revisions to international tax regimes. The enacted legislation had an immaterial impact on the Company’s effective tax rate for the year ended June 30, 2026. As of June 30, 2026, we have recognized a deferred income tax liability of $43.2 million (June 30, 2025—$20 million) on taxable temporary differences related to the undistributed earnings of certain non-U.S. subsidiaries and planned periodic repatriations from certain German and Indian subsidiaries, that will be subject to withholding taxes upon distribution. We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future.

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