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Income taxes

12 Months Ended

Dec. 31, 2022

Income taxes

Income taxes

17.         Income taxes

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a.           Income tax (benefit) / expense

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Due to the uncertainty surrounding the realization of favorable tax attributes in future tax returns, the Company has recorded a valuation allowance against the Company’s net deferred tax assets in the Netherlands. The Company released a full valuation allowance against the Company’s net deferred tax assets in the United States as of December 31, 2020.

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In connection with the Corlieve acquisition, the Company recognized a deferred tax liability related to acquired identifiable intangible assets and a deferred tax asset for net operating tax loss carryforwards for a net of EUR 11.9 million ($14.2 million) as of the Acquisition Date.

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There are no significant unrecognized tax benefits as of December 31, 2022 and 2021.

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For the years ended December 31, 2022, 2021 and 2020, (loss) / income before income tax benefit / (expense) consists of the following:

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​	​	​	​	​	​	​	​	​	​
​	​	Years ended December 31,
​		2022			2021			2020
​	​	(in thousands)
Dutch operations	​	$	(96,872)	​	$	348,400	​	$	(130,493)
U.S. operations	​		(14,934)	​		(12,737)	​		(10,950)
Other	​	​	(16,453)	​	​	(2,857)	​	​	—
Total	​	$	(128,259)	​	$	332,806	​	$	(141,443)

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The income tax benefit / (expense) for the years ended December 31, 2022, 2021 and 2020, consists of the following:

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​	​	​	​	​	​	​	​	​	​
​	​	Years ended December 31,
​		2022			2021			2020
​	​	(in thousands)
Current tax (expense)	​	​	​	​	​	​	​	​	​
Other	​	$	(24)	​	$	(7)	​	$	—
Total current tax (expense)	​	$	(24)	​	$	(7)	​	$	—
Deferred tax benefit / (expense)	​		​	​		​	​		​
Dutch operations	​	$	(808)	​	$	(3,047)	​	$	—
U.S. operations	​		(1,075)	​		(771)	​		16,419
Other	​	​	3,377	​	​	608	​	​	—
Total deferred tax benefit / (expense)	​	$	1,494	​	$	(3,210)	​	$	16,419
Total income tax benefit / (expense)	​	$	1,470	​	$	(3,217)	​	$	16,419

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b.           Tax rate reconciliation

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The reconciliation of the amount of income tax benefit / (expense) that would result from applying the Dutch statutory income tax rate to the Company’s reported amount of (loss) / income before income tax benefit / (expense) for the years ended December 31, 2022, 2021 and 2020, is as follows:

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​	​	​	​	​	​	​	​	​	​
​		Years ended December 31,
​	​	2022		​	2021		​	2020
​	​	(in thousands)
(Loss) / income before income tax benefit / (expense) for the period	​	$	(128,259)	​	$	332,806	​	$	(141,443)
Expected income tax benefit / (expense) at the tax rate enacted in the Netherlands (2022: 25.8%, 2021: 25.0%, 2020: 25.0%)	​		33,091	​		(83,201)	​		35,361
Non-deductible expenses	​		(11,129)	​		(9,182)	​		(5,041)
Other net change in valuation allowance	​		(20,591)	​		88,857	​		(30,568)
Difference in tax rates between the Netherlands and the U.S. as well as other foreign countries	​		99	​		309	​		247
Release of valuation allowance related to expected future taxable income of U.S. operations	​	​	—	​	​	—	​	​	16,419
Income tax benefit / (expense)	​	$	1,470	​	$	(3,217)	​	$	16,419

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Non-deductible expenses predominantly relate to share-based compensation expenses. These expenses affected the effective tax rate by an amount of $8.5 million in 2022 (2021: $6.7 million; 2020: $5.8 million). The fair value loss on contingent consideration affected the effective tax rate by an amount of $1.9 million in 2022 ($2.0 million and nil in 2021 and 2020, respectively).

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c.           Significant components of deferred taxes

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The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and deferred tax liabilities as of December 31, 2022 and 2021 are as follows:

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​	​	​	​	​	​	​
​		Years ended December 31,
​	​	2022		​	2021
​	​	(in thousands)
Deferred tax assets:		​			​
Net operating loss carryforwards	​	$	84,633	​	$	71,917
Operating lease liabilities	​	​	10,612	​	​	9,300
Intangible assets	​		3,826	​		2,039
Accrued expenses and other current liabilities	​	​	1,862	​	​	1,312
Property, plant and equipment	​		510	​		971
Inventory	​	​	—	​	​	148
Research and development tax credit carryforwards	​	​	144	​	​	105
Interest carryforwards	​	​	3,697	​	​	—
Total deferred tax assets	​	$	105,284	​	$	85,792
Less valuation allowance	​		(74,547)	​		(60,289)
Deferred tax assets, net of valuation allowance	​	$	30,737	​	$	25,503
Acquired IPR&D Intangible Asset	​	​	(15,033)	​	​	(15,189)
Operating lease right-of-use assets	​	​	(9,323)	​	​	(7,493)
Other current assets and receivables	​	​	(110)	​	​	(87)
Deferred tax liability	​	$	(24,466)	​	$	(22,769)
Net deferred tax asset	​	$	6,271	​	$	2,734

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Changes in the valuation allowance were as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years ended December 31,
​		2022			2021			2020
​	​	(in thousands)
January 1,	​	$	60,289	​	$	150,113	​	$	109,856
Changes recorded in the statement of operations	​	​	20,593	​	​	(88,858)	​	​	30,568
Changes recorded in equity	​	​	(972)	​	​	—	​	​	—
Increase related to 2021 and 2020 Dutch tax reforms	​		—	​		1,897	​		18,287
Valuation allowance assumed in Corlieve acquisition	​	​	—	​	​	545	​	​	—
Release of valuation allowance related to expected current year and future periods recorded in profit and loss	​	​	—	​	​	—	​	​	(16,419)
Other changes including currency translation adjustments	​		(5,363)	​		(3,408)	​	​	7,821
December 31,	​	$	74,547	​	$	60,289	​	$	150,113

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The Company released the full valuation allowance against the Company’s net deferred assets in the United States as of December 31, 2020. Included within changes recorded in the statement of operations for the year ended December 31, 2020 are benefits of $1.2 million from the utilization of U.S. net operating loss carryforwards.

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The valuation allowance as of December 31, 2022 is primarily related to net operating loss carryforwards in the Netherlands.

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Netherlands

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As of December 31, 2022, the total amount of net operating losses carried forward under the Dutch tax regime was $264.0 million (December 31, 2021: $228.5 million, 2020: $588.2 million). The Company has historically recorded a full valuation allowance. The Company evaluates all positive and negative evidence including future income from the CSL Behring Agreement in assessing the need for such a full valuation allowance. Management considered reversing taxable temporary differences, projected future taxable income and tax-planning strategies in making this assessment. The Company concluded that as of December 31, 2022, December 31, 2021 and December 31, 2020 it is more likely than not that the remaining deferred tax assets will not be realized.

The Company recorded $462.4 million of license revenue in May 2021 after the Closing of the CSL Behring transaction. The Company recorded such revenue in its Dutch tax return related to the 12-month period ended December 31, 2020, which it filed on February 10, 2022. As such, the Company filed a return showing a taxable profit in the Netherlands in 2020, which resulted in the consumption of substantially all of its Dutch net operating losses for the years 2011 to 2018. The Company’s remaining Dutch net operating tax losses carried forward relate to 2019 and 2022. The Company allocated the tax benefit from the release of the valuation allowance related to net operating loss carryforwards generated by share issuance cost incurred in 2014, 2015, 2017 and 2018 to additional paid-in capital. This resulted in an increase of additional paid-in capital as well as deferred tax expenses of $3.0 million during the year ended December 31, 2021.

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The Company recorded $0.8 million increase of additional paid-in capital in the year ended December 31, 2022 resulting from the release of valuation allowance for the tax benefit of share issuance costs incurred in 2018, 2019 and 2021.

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A portion of the valuation allowance for deferred tax assets recorded as of December 31, 2022 continues to relate to follow-on offering costs incurred in 2019. Any subsequently recognized tax benefits will be credited directly to contributed capital. As of December 31, 2022, that amount was $3.3 million ($4.5 million as of December 31, 2021).

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The Dutch corporate tax rate for fiscal years 2020 and 2021 was 25.0%. In December 2021, further changes were enacted that raised the corporate income tax rate from 25.0% to 25.8% from 2022 onwards.

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In June 2021 legislation was enacted allowing for an indefinite carryforward from fiscal year 2022 onwards of existing and future net operating loss carryforwards subject to a limit of offsetting taxable profit in excess of EUR 1.0 million to 50% of the taxable profit.

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The fiscal periods from 2020 onwards are still open for inspection by the Dutch tax authorities.

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United States of America

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The federal corporate tax rate in the U.S. is 21.0%. In addition, the Company is subject to state income taxes resulting in a combined tax rate of 27.32% for its U.S. operation. As of December 31, 2022, an estimated $38.5 million of net operating losses remain to be carried forward. These losses will expire between 2035 and 2037.

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The Company’s U.S. operations generated taxable income in the fiscal years 2018 to 2022. The Company expects to continue to generate taxable income in the U.S. during the foreseeable future.

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Under the provision of the Internal Revenue Code, the U.S. net operating losses may become subject to an annual limitation in the event of certain cumulative exchange in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Section 382 and 383 of the Internal Revenue Code. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation.

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The fiscal periods from 2019 are still open for inspection by the Internal Revenue Service (“IRS”). To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS or Massachusetts Department of Revenue to the extent utilized in a future period. The Company is currently not under examination by the IRS for any tax years.

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France

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The French corporate tax rate for fiscal year 2022 was 25%. In addition, the Company is subject to a surcharge of 3.3% of the 25.0% standard corporate tax rate resulting in a combined rate of 25.8%.

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The Company’s French operation has incurred losses since incorporation and is expected to continue incurring tax losses for the foreseeable future.

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The French operation as of December 31, 2022 has an estimated $23.3 million of taxable losses that are available for carry forward indefinitely.

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X

- References

No definition available.

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- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

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-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
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-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
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-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

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