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Income Taxes

12 Months Ended

Jan. 31, 2024

Income Taxes.

Income Taxes

Note 17 - Income Taxes

Income before income taxes is earned in the following tax jurisdictions:

​

​	​	​	​	​	​	​
​		January 31,		January 31,		January 31,
Year Ended	​	2024	​	2023	​	2022
​	​	​	​	​	​	​
Canada		53,246		49,158		36,312
United States		62,346		51,268		32,338
Other countries		35,560		33,302		33,960
​		151,152		133,728		102,610

​

Income tax expense is incurred in the following jurisdictions:

​

​	​	​	​	​	​	​
​		January 31,		January 31,		January 31,
Year Ended	​	2024	​	2023	​	2022
Current income tax expense
Canada		16,376		9,673		1,817
United States		16,532		13,085		8,689
Other countries		8,315		5,490		4,308
​		41,223		28,248		14,814
Deferred income tax expense (recovery)
Canada		(2,369)		5,059		8,381
United States		(5,060)		(1,888)		1,941
Other countries		1,451		73		(8,808)
​		(5,978)		3,244		1,514
​		35,245		31,492		16,328

​

Income tax expense for 2024, 2023 and 2022 was 23%, 24% and 16% of income before income taxes, respectively, with current income tax expense being 27%, 21% and 14% of income before income taxes, respectively.

Current income tax expense increased in 2024 compared to 2023 primarily due to a decrease in tax attributes available to shelter income in Canada and the new requirement to capitalize research and development expenses in the United States.

Current income tax expense increased in 2023 compared to 2022 primarily due to the impact of the loss restriction rules in the UK and lower tax attributes available in Canada and US to deduct against income, in 2023.

Deferred income tax expense decreased in 2024 compared to 2023 primarily due to the capitalization of research and development expenses in the United States in 2024 and the increased utilization of tax attributes in Canada in 2023.

Deferred income tax expense increased in 2023 compared to 2022 primarily due to a release in valuation allowances on tax losses carried forward in the comparative period, partially offset against a recovery of certain deferred tax attributes in the US recorded in 2023, as well as normal course changes in timing differences in Canada.

​

The components of the deferred income tax assets and liabilities are as follows:

​

​	​	​	​	​
​		January 31,		January 31,
​	​	2024	​	2023
Assets
Accrued liabilities not currently deductible		11,736		5,506
Accumulated net operating losses		2,397		7,577
Difference between tax and accounting basis of property and equipment		9,088		7,400
Research and development expenditures and tax credits		7,680		3,339
Total deferred income tax assets		30,901		23,822
Liabilities		​		​
Difference between tax and accounting basis of intangible assets		(42,423)		(42,958)
Temporary difference on equity derivative and related party debt		(5,513)		(3,077)
Total deferred income tax liabilities		(47,936)		(46,035)
Net deferred income taxes		(17,035)		(22,213)
Valuation allowance		(1,969)		(1,704)
Net deferred income taxes, net of valuation allowance		(19,004)		(23,917)

​

As at January 31, 2024, we have not accrued for foreign withholding taxes and Canadian income taxes applicable to approximately $909.0 million of unremitted earnings of subsidiaries operating outside of Canada. These earnings, which we consider to be invested indefinitely, will become subject to these taxes if and when they are remitted as dividends or if we sell our stock in the subsidiaries. If we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside Canada.

The provision (recovery) for income taxes varies from the expected provision at the statutory rates for the reasons detailed in the table below:

​

​	​	​	​	​	​	​	​
​		January 31,		January 31,		January 31,
Year Ended	​	2024	​	2023	​	2022
Income before income taxes		151,152		133,728		102,610	​
​	​	​	​	​	​	​	​
Combined basic Canadian statutory rates		26.5	%	26.5	%	26.5	%
​	​	​	​	​	​	​	​
Income tax expense based on the above rates		40,055		35,438		27,192	​
Increase (decrease) in income taxes resulting from:							​
Permanent differences		124		590		3,467	​
Effect of differences between Canadian and foreign tax rates		(1,293)		(1,859)		(1,855)	​
Effect of rate changes on current year timing differences		(48)		(219)		(1,085)	​
Change in estimates relating to prior periods		(2,888)		(972)		(569)	​
Increase (decrease) in accruals for uncertain tax positions		(117)		(1,181)		(849)	​
Valuation allowance		263		(155)		(9,102)	​
Other, including foreign exchange and tax credits		(851)		(150)		(871)	​
Income tax expense		35,245		31,492		16,328	​

​

We have income tax loss carry forwards which expire as follows:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	United	​	​	​	​	​	​
Expiry year		Canada		States		EMEA		Asia Pacific		Total
2025	​	—	​	—	​	—	​	167	​	167
2026		—		—		—		60		60
2027		—		138		—		276		414
2028		—		138		—		53		191
2029		—		138		—		154		292
Thereafter		—		843		7,793		377		9,013
​		—		1,257		7,793		1,087		10,137

​

The following is a tabular reconciliation of the total estimated liability associated with uncertain tax positions taken:

​

​	​	​	​	​
​		January 31,		January 31,
​	​	2024	​	2023
Liability, beginning of year		6,120		7,354
Gross increases – current period		3,946		640
Lapsing due to statutes of limitations		(3,913)		(1,874)
Liability, end of year		6,153		6,120

​

We have identified accruals of $6.1 million with respect to uncertain tax positions as at January 31, 2024. It is possible that these accruals for uncertain tax positions will not be required in which case up to $6.1 million of the recorded liability will decrease the effective tax rate in future years if this liability is reversed. We believe that it is reasonably possible that $0.4 million of the uncertain tax positions could decrease tax expense in the next 12 months relating primarily to tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions.

We recognize accrued interest and penalties related to uncertain tax positions as a current tax expense. As at January 31, 2024 and January 31, 2023, the unrecognized tax positions have resulted in no material liability for estimated interest and penalties.

Descartes and our subsidiaries file their tax returns as prescribed by the tax laws of the jurisdictions within which they operate. We are no longer subject to income tax examinations by tax authorities in our major tax jurisdictions as follows:

​

​	​	​
​	​	Years No Longer Subject to
​		Audit
Tax Jurisdiction	​
United States Federal		2020 and prior
Canada		2018 and prior
United Kingdom		2020 and prior
Sweden		2021 and prior
Norway		2017 and prior
Netherlands		2018 and prior
Belgium		2021 and prior
Germany		2018 and prior
Switzerland		2019 and prior
Brazil		2019 and prior

​

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The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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