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Income Tax | 12 Months Ended
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Jun. 30, 2021
Income Tax [Abstract] |
Income Tax | 17. I NCOME TAX Income tax provision The table below presents the components of (loss) income before income taxes for the years ended June 30, 2021, 2020 and 2019: 2021 2020 2019 South Africa $ (30,825) $ (26,230) $ (273,265) United States (6,686) (8,984) (23,479) Liechtenstein (810) (17,519) - Other 32,702 (12,283) (22,699) Loss before income taxes $ (5,619) $ (65,016) $ (319,443) Presented below is the provision for income taxes by location of the taxing jurisdiction for the years ended June 30, 2021, 2020 and 2019: 2021 2020 2019 Current income tax expense (benefit) $ 859 $ 1,652 $ 4,789 South Africa 866 1,552 3,689 United States (75) 12 1,100 Other 68 88 - Deferred taxation charge (benefit) 6,691 932 (8,917) South Africa (2,039) 653 (8,538) United States 9,136 - 4 Other (406) 279 (383) Foreign tax credits generated – United States 10 72 (944) Income tax provision (benefit) $ 7,560 $ 2,656 $ (5,072) There were no changes to the enacted tax rate in the years ended June 30, 2021, 2020 and 2019. During the years ended June 30, 2021, 2020 and 2019, the Company incurred net operating losses through certain of it its South African wholly-owned subsidiaries and recorded a deferred taxation benefit related to these losses. However, the Company has created a valuation allowance for these net operating losses which reduced the deferred taxation benefit recorded. The Company incurred a net capital gain, after the application of capital loss carryforwards, related to the internal restructuring of a wholly-owned subsidiary during the year ended June 30, 2020. The Company also generated taxable capital gains during the year ended June 30, 2020, related to the disposal of FIHRST (refer to Note 23) and the sale of DNI (refer to Note 8) but utilized capital loss carryforwards to reduce the capital gains on these transactions to zero ($ 0 ). 17. INCOME TAX (continued) Income tax provision (continued) The Company calculated its Transition Tax liability as of June 30, 2018, and incurred a Transition Tax, before the application of any foreign tax credits, of $ 55.8 million, and has no liability after the application of generated foreign tax credits. During the year ended June 30, 2019, the Company recorded the difference of $ 1.1 million between the Transition Tax liability of $ 56.9 million and the provisional Transition Tax liability of $ 55.8 million in current income tax, United States. During the year ended June 30, 2019, the Company also included the additional foreign tax credits utilized of $ 1.1 million against this Transition Tax in foreign tax credits generated – United States. A reconciliation of income taxes, calculated at the fully-distributed South African income tax rate to the Company’s effective tax rate, for the years ended June 30, 2021, 2020 and 2019, is as follows: 2021 2020 2019 Income taxes at fully-distributed South African tax rates 28.00 % 28.00 % 28.00 % Movement in valuation allowance (250.16) % 1.64 % (22.98) % Non-deductible items (58.40) % (10.38) % (3.33) % Foreign tax rate differential 51.21 % (4.17) % (0.07) % Capital gains differential 93.03 % (1.59) % (1.46) % Prior year adjustments 1.77 % (0.01) % (0.03) % Release from FCTR - - (14.65) % - - Subpart F inclusions - - (2.85) % - - Foreign tax credits - - (0.08) % 0.35 % Taxation on deemed dividends in the United States - - - - 1.45 % Transition Tax - - - - (0.34) % Income tax provision (134.55) % (4.09) % 1.59 % Percentages included in the 2021, 2020 and 2019 columns in the reconciliation of income taxes presented above are impacted by the loss incurred by the Company during the year ended June 30, 2021, 2020 and 2019. For instance, the income tax provision of $ 7.6 million represents ( 134.55 %) multiplied by the net loss before tax of $( 5,619 ). Movement in the valuation allowance for the year ended June 30, 2021, includes allowances created related to net operating losses incurred during the year. Non-deductible items for the year ended June 30, 2021, includes the impact of the allowance for doubtful loans created. The foreign tax rate differential relates primarily to the difference between the fully-distributed South African income tax rate and the rate used ( 21 %) to measure the deferred tax liability created related to the fair adjustment to the Company’s investment in MobiKwik (refer to Note 8). The capital gains differential for the year ended June 30, 2021, represents the impact of the reversal of the deferred tax liability related to one of the Company’s equity-accounted investments following its impairment (refer to Note 8). Movement in the valuation allowance for the year ended June 30, 2020, includes allowances created related to net operating losses incurred during the year and valuation allowances created for a deferred tax asset recorded related to the deconsolidation of CPS and other corporate transactions. Release from FCTR for the year ended June 30, 2020, relates to the releases from accumulated other comprehensive loss (refer to Note 14) that are not deductible for tax purposes. Non-deductible items for the year ended June 30, 2020, includes the option termination fee paid and the goodwill impairment loss recognized. Movement in the valuation allowance for the year ended June 30, 2019, includes allowances created related to net operating losses incurred during the year and a valuation allowance created for a deferred tax asset recorded related to the DNI disposal capital losses generated (refer to Note 8) and the Cell C capital loss following the fair value adjustment (refer to Note 5). Non-deductible items for the year ended June 30, 2019, includes the impairment losses recognized related to goodwill impaired. 17. INCOME TAX (continued) Deferred tax assets and liabilities Deferred income taxes reflect the temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The primary components of the temporary differences that gave rise to the Company’s deferred tax assets and liabilities as of June 30, and their classification, were as follows: June 30, June 30, 2021 2020 Total deferred tax assets Capital losses related to investments $ 47,518 $ 36,721 Net operating loss carryforwards 36,329 32,459 Foreign tax credits 32,737 32,799 Provisions and accruals 2,123 3,936 FTS patent 163 181 Other 654 815 Total deferred tax assets before valuation allowance 119,524 106,911 Valuation allowances (118,777) (106,433) Total deferred tax assets, net of valuation allowance 747 478 Total deferred tax liabilities: Intangible assets 100 171 Investments 10,354 1,755 Other 87 53 Total deferred tax liabilities 10,541 1,979 Reported as Long-term deferred tax assets 622 358 Long-term deferred tax liabilities 10,415 1,859 Net deferred income tax liabilities $ 9,793 $ 1,501 Increase in total net deferred income tax liabilities Capital losses related to investments Capital losses as of June 30, 2021 and 2020, comprises the capital loss arising from the difference between the amount paid for Cell C in August 2017 and the its fair value as of the respective year end, of $ 0.0 million, and difference between the amount paid for CPS in 2004 and the its fair value as of the respective year end, of $ 0.0 million. The change in capital losses related to investments relates primarily to the impact of currency changes between the South Africa Rand against the United States dollar. Net operating loss carryforwards Net operating loss carryforwards have increased due to losses incurred by certain of the Company’s subsidiaries and the impact of currency changes between the South Africa Rand against the United States dollar, which was partially offset by net operating losses carryforwards forfeited following the substantial liquidation of certain of the Company’s subsidiaries. Investments Investment increased during the year ended June 30, 2021, primarily as a result of the fair value adjustments to the carrying value of MobiKwik (refer to Note 8). Decrease in valuation allowance At June 30, 2021, the Company had deferred tax assets of $ 0.7 million (2020: $ 0.5 million), net of the valuation allowance. Management believes, based on the weight of available positive and negative evidence it is more likely than not that the Company will realize the benefits of these deductible differences, net of the valuation allowance. However, the amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of taxable income are revised. 17. INCOME TAX (continued) Deferred tax assets and liabilities (continued) Decrease in valuation allowance (continued) At June 30, 2021, the Company had a valuation allowance of $ 118.8 million (2020: $ 106.4 million) to reduce its deferred tax assets to estimated realizable value. The movement in the valuation allowance for the years ended June 30, 2021 and 2020, is presented below: Total Capital losses related to investments Net operating loss carry- forwards Foreign tax credits Other July 1, 2019 $ 125,887 $ 43,569 $ 35,861 $ 32,799 $ 13,658 Charged to statement of operations 27,700 5,399 20,602 - 1,699 Reversed to statement of operations (14,314) (5,486) (77) - (8,751) Deconsolidation (16,130) - (15,830) - (300) Utilized (3,896) - (3,632) - (264) Foreign currency adjustment (12,814) (6,761) (4,651) - (1,402) June 30, 2020 106,433 36,721 32,273 32,799 4,640 Charged to statement of operations 16,376 3,532 13,264 - (420) Reversed to statement of operations (14,840) - (13,687) (62) (1,091) Utilized (1,422) - (135) - (1,287) Foreign currency adjustment 12,230 7,265 4,555 - 410 June 30, 2021 $ 118,777 $ 47,518 $ 36,270 $ 32,737 $ 2,252 Net operating loss carryforwards and foreign tax credits United States Net operating loss generated are carried forward indefinitely, but the loss carryforward that may be used against future taxable income is limited to 80% of taxable income before the net operating loss deduction. In March 2020, the Coronavirus Aid, Relief and Economic Security Act (the “Cares Act”) was enacted. The Cares Act, among other items, provides for a temporary repeal of the 80 percent net operating loss limitation and provides temporary modifications to the limitation on deductibility of business interest. As of June 30, 2021, Net1 had net operating loss carryforwards that will expire, if unused, as follows: Year of expiration U.S. net operating loss carry forwards 2024 $ 775 Net1 had no net unused foreign tax credits that are more likely than not to be realized as of June 30, 2021 and 2020, respectively. Uncertain tax positions As of June 30, 2021 and 2020, the Company had no unrecognized tax benefits which would impact the Company’s effective tax rate. The Company files income tax returns mainly in South Africa, Germany, Hong Kong, India, Malta, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of June 30, 2021, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, 2017. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, statement of cash flows, or results of operations. The Company does not expect the change related to unrecognized tax benefits will have a significant impact on its results of operations or financial position in the next 12 months.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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