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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Taxes |
Income Taxes | Note 22. Income Taxes The Company is incorporated in the Cayman Islands, a tax-free country; accordingly, pretax income generated by the group parent company is not subject to local income tax. Substantially all of the Company’s taxable income is derived from the operations in the ROC and, therefore, substantially all of the Company’s income tax expense attributable to income from continuing operations is incurred in the ROC. Other foreign subsidiary companies calculate income tax in accordance with local tax law and regulations. According to the amendments to the ROC Statute for Industrial Innovation in July 2022, in addition to providing 3 year extension for the existing tax credits for smart machinery and 5G system expenditures, tax credit for cyber security expenditures was added as new incentive items. Tax credit for investment amount eligible for smart machinery and cyber security limited to 5% of expenditure for the current year or 3% of expenditure within 3 consecutive years. Tax credit for smart machinery and cyber security combined with R&D tax credit shall not exceed 50% of current year corporate income tax plus undistributed earnings tax payable. ​
| (a) | Income tax expense (benefit) recognized in profit or loss for the years ended December 31, 2021, 2022 and 2023 consists of the following:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year ended December 31,
​ |  | 2021 | ​ | 2022 |  | 2023
​ | ​ | (in thousands)
Current tax expense |  | ​ | ​ | ​ |  |  |
Current period | ​ | $ | 102,297 |  | 48,808 |  | 155
Adjustment for prior periods | ​ | ​ | 12 |  | (2,723) |  | (2,614)
​ | ​ | ​ | 102,309 |  | 46,085 |  | (2,459)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax expense | ​ | ​ |  |  |  |  |
Origination and reversal of temporary differences | ​ | ​ | 310 |  | (5,742) |  | 2,436
Investment tax credits and operating loss carryforward | ​ | ​ | 8,038 |  | 755 |  | (5,005)
​ | ​ | ​ | 8,348 |  | (4,987) |  | (2,569)
Total income tax expense (benefit) | ​ | $ | 110,657 |  | 41,098 |  | (5,028)
​
| (b) | Income taxes expense (benefit) recognized directly in other comprehensive income for the years ended December 31, 2021, 2022 and 2023 consist of the following:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year ended December 31,
​ |  | 2021 | ​ | 2022 |  | 2023
​ | ​ | (in thousands)
Items that will not be reclassified to profit or loss: | ​ | ​ | ​ | ​ |  | ​ |
Remeasurements of defined benefit pension plans | ​ | $ | 27 |  | 107 |  | (1)
​
| (c) | Reconciliation of the expected income tax expense computed based on the ROC statutory income tax rate of 20% compared with the actual income tax expense as reported in the consolidated statements of profit or loss for the years ended December 31, 2021, 2022 and 2023 are summarized as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Years ended December 31,
​ | ​ | 2021 | ​ | 2022 | ​ | 2023
​ |  | Rate | ​ | Amount |  | Rate |  | Amount |  | Rate | ​ | Amount
​ | ​ | ​ | ​ | (in thousands) | ​ | ​ | ​ | (in thousands) | ​ | ​ | ​ | (in thousands)
Profit before income taxes |  |  | ​ | $ | 544,592 |  |  | ​ | $ | 276,565 |  |  | ​ | $ | 44,393
Income tax expense calculated at the statutory rate |  | 20.0 | % | ​ | 108,919 |  | 20.0 | % | ​ | 55,313 |  | 20.0 | % | ​ | 8,879
Tax on undistributed earnings |  | 4.2 | % | ​ | 22,648 |  | 3.9 | % | ​ | 10,668 |  | 4.4 | % | ​ | 1,931
Tax benefit resulting from setting aside legal reserve from prior year’s income | ​ | — | ​ | ​ | (267) | ​ | (0.8) | % | ​ | (2,215) | ​ | (2.9) | % | ​ | (1,267)
Tax benefit resulting from actual investment from prior year’s undistributed earnings | ​ | — | ​ | ​ | (161) | ​ | (0.1) | % | ​ | (303) | ​ | — | ​ | ​ | —
Increase in tax credits |  | (3.3) | % | ​ | (17,934) |  | (5.6) | % | ​ | (15,556) |  | (22.2) | % | ​ | (9,864)
Effect of change of unrecognized deductible temporary differences and tax losses carryforwards |  | 0.7 | % | ​ | 3,668 |  | 1.7 | % | ​ | 4,706 |  | 9.3 | % | ​ | 4,127
Net of non-taxable income and non-deductible expense |  | (2.0) | % | ​ | (10,680) |  | (5.0) | % | ​ | (13,728) |  | (16.0) | % | ​ | (7,090)
Changes in unrecognized tax benefits |  | 0.5 | % | ​ | 2,763 |  | 1.1 | % | ​ | 3,003 |  | (3.1) | % | ​ | (1,380)
Foreign tax rate differential |  | 0.2 | % | ​ | 837 |  | 0.5 | % | ​ | 1,370 |  | 1.7 | % | ​ | 752
Variance from audits, amendments and examinations of prior years’ income tax filings |  | — | ​ | ​ | 440 |  | (0.1) | % | ​ | (205) |  | (3.0) | % | ​ | (1,347)
Others |  | — | ​ | ​ | 424 |  | (0.7) | % | ​ | (1,955) |  | 0.5 | % | ​ | 231
Income tax expense (benefit) |  | ​ | ​ | $ | 110,657 |  | ​ | ​ | $ | 41,098 |  | ​ | ​ | $ | (5,028)
Effective tax rate |  | 20.3 | % | ​ |  |  | 14.9 | % | ​ |  |  | (11.3) | % | ​ |
​ ​
| (d) | As of December 31, 2022 and 2023, the components of deferred tax assets and deferred tax liabilities were as follows:
​ | ​ | ​ | ​ | ​ | ​
​ |  | December 31, |  | December 31,
​ | ​ | 2022 | ​ | 2023
​ | ​ | (in thousands)
Deferred tax assets: |  |  |  |  |
Inventory | ​ | $ | 5,335 |  | 4,696
Tax credit carryforwards | ​ |  | — |  | 5,005
Accrued compensated absences | ​ |  | 926 |  | 941
Allowance for sales discounts | ​ |  | 1,465 |  | 1,902
Depreciation | ​ |  | 641 |  | 1,149
Others | ​ |  | 3,430 |  | 503
​ | ​ | $ | 11,797 |  | 14,196
​ | ​ | ​ | ​ | ​ | ​
Deferred tax liabilities: | ​ |  | ​ |  | ​
Remeasurement of defined benefit plans | ​ | $ | (250) |  | (254)
Unrealized foreign exchange gain | ​ |  | (364) |  | (261)
Others | ​ | ​ | (77) | ​ | (5)
​ | ​ | $ | (691) |  | (520)
​ As of December 31, 2023, the Company has not provided for income taxes on undistributed earnings of approximately $1,307,415 thousand of its foreign subsidiaries since the Company has specific plans to reinvest these earnings indefinitely. A deferred tax liability will be recognized when the Company can no longer demonstrate that it plans to indefinitely reinvest these undistributed earnings. This amount becomes taxable when the ultimate parent company, Himax Technologies, Inc., executes other investments, share buybacks or shareholder dividends to be funded by cash distribution by its foreign subsidiaries. It is not practicable to estimate the amount of additional taxes that might be payable on such undistributed earnings because of the complexities of the hypothetical calculation.
| (e) | Changes in deferred tax assets and liabilities were as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | ​ |  | Recognized |  | ​ |  | ​ |  | Recognized |  | ​
​ | ​ | ​ | ​ | ​ | Recognized | ​ | in other | ​ | ​ | ​ | Recognized | ​ | in other | ​ | ​
​ | ​ | January 1, | ​ | in profit or | ​ | comprehensive | ​ | December | ​ | in profit or | ​ | comprehensive | ​ | December
​ | ​ | 2022 | ​ | loss | ​ | income | ​ | 31, 2022 | ​ | loss | ​ | income | ​ | 31, 2023
​ | ​ | (in thousands)
Inventory | ​ | $ | 2,955 |  | 2,380 |  | — |  | 5,335 |  | (639) |  | — |  | 4,696
Tax credit carryforwards | ​ |  | — |  | — |  | — |  | — |  | 5,005 |  | — |  | 5,005
Operating loss carryforward | ​ |  | 755 |  | (755) |  | — |  | — |  | — |  | — |  | —
Accrued compensated absences | ​ |  | 901 |  | 25 |  | — |  | 926 |  | 15 |  | — |  | 941
Allowance for sales discounts | ​ |  | 720 |  | 745 |  | — |  | 1,465 |  | 437 |  | — |  | 1,902
Depreciation | ​ |  | 601 |  | 40 |  | — |  | 641 |  | 508 |  | — |  | 1,149
Unrealized foreign exchange loss | ​ |  | (71) |  | (293) |  | — |  | (364) |  | 103 |  | — |  | (261)
Remeasurement of defined benefit plans | ​ |  | (138) |  | (5) |  | (107) |  | (250) |  | (5) |  | 1 |  | (254)
Acquired intangible assets | ​ |  | (756) |  | 756 |  | — |  | — |  | — |  | — |  | —
Others | ​ |  | 1,259 |  | 2,094 |  | — |  | 3,353 |  | (2,855) |  | — |  | 498
Total | ​ | $ | 6,226 |  | 4,987 |  | (107) |  | 11,106 |  | 2,569 |  | 1 |  | 13,676
​ ​
| (f) | Unrecognized Deferred Tax Assets
Gross amount of deferred tax assets have not been recognized in respect of the following items.
​ | ​ | ​ | ​ | ​ | ​
​ |  | December 31, |  | December 31,
​ | ​ | 2022 | ​ | 2023
​ | ​ | (in thousands)
Unused tax credits | ​ | $ | 1,560 |  | 1,560
Unused operating loss carryforwards-statutory tax | ​ |  | 206,259 |  | 215,956
Unused operating loss carryforwards-undistributed earnings tax | ​ |  | 271,093 |  | 288,301
Others | ​ |  | 29,413 |  | 19,468
​ | ​ | $ | 508,325 |  | 525,285
​ As of December 31, 2023, the unused investment tax credits with its expiration year from 2024 to 2035 from US operations were $1,560 thousand. Tax loss carryforwards is utilized in accordance with the relevant jurisdictional tax laws and regulations. Net losses from foreign subsidiaries are approved by tax authorities in respective jurisdiction to offset future taxable profits. Under ROC Income Tax Acts, the tax loss carryforward in the preceding ten years is available to be deducted from tax income for Taiwan operations. The statutory losses would be deducted for undistributed earnings tax and were not subject to expiration for Taiwan operations. As of December 31, 2023, the expiration period for abovementioned unrecognized deferred tax assets of unused operating loss carryforwards for statutory tax were as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | Unrecognized |  | ​
​ | ​ | Deductible amount | ​ | deferred tax assets | ​ | Expiration year
​ | ​ | (in thousands) | ​ | ​
Taiwan operations | ​ | $ | 106,123 | ​ | $ | 21,225 |  | 2024~2028
​ | ​ |  | 94,342 | ​ |  | 18,868 |  | 2029~2033
Hong Kong operations | ​ |  | 1,815 | ​ |  | 150 |  | Indefinitely
US operations | ​ |  | 13,676 | ​ |  | 3,810 |  | 2024~Indefinitely
​ | ​ | ​ | ​ | ​ | $ | 44,053 | ​ | ​
​
| (g) | Assessments by the tax authorities
The Company’s major taxing jurisdiction is Taiwan. All Taiwan subsidiaries’ income tax returns have been examined and assessed by the ROC tax authorities through 2021. The income tax returns of 2022 for all Taiwan subsidiaries are open to examination by the ROC tax authorities. Taiwanese entities are customarily examined by the tax authorities and it is possible that a future examination will result in a positive or negative adjustment to the Company’s unrecognized tax benefits within the next 12 months; however, management is unable to estimate a range of the tax benefits or detriment as of December 31, 2023.

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