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Note 7 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

7.

Income taxes

 

Cayman Islands

 

The Company is incorporated in the Cayman Islands and is not subject to income tax under the current laws of the Cayman Islands.

 

BVI

 

BeyondSpring Ltd., BVI Biotech, SEED and SEED Technology are all incorporated in the BVI and are not subject to income tax under the current laws of the BVI.

 

U.S.

 

BeyondSpring US and SEED US are incorporated in Delaware, the U.S. They are subject to statutory U.S. Federal corporate income tax at a rate of 21% for all years presented.

 

Australia

 

BeyondSpring Australia is incorporated in Australia and is subject to corporate income tax at a rate of 30%. BeyondSpring Australia had no taxable income for all years presented and therefore, no provision for income taxes is required. BeyondSpring Australia was deregistered in Australia in March 2023.

 

Hong Kong

 

BeyondSpring HK is incorporated in Hong Kong. Companies registered in Hong Kong are subject to Hong Kong Profits Tax on the taxable income as reported in their respective statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. BeyondSpring HK had no taxable income for all years presented and therefore, no provision for income taxes is required.

 

 

BEYONDSPRING INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(Amounts in thousands of U.S. Dollars (“$”) and Renminbi (“RMB”),

except for number of shares and per share data)

 

7.

Income Taxes (continued)

 

PRC

 

Wanchun Dalian, Wanchunbulin, Beijing Wanchun, and Wanchun Hongji are subject to the statutory tax rate of 25% in accordance with the PRC Enterprise Income Tax Law (“EIT Law”), which was effective since January 1, 2008. In accordance with the implementation rules of EIT Law, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years. An entity must file required supporting documents with the tax authority and ensure fulfillment of the relevant HNTE criteria before using the preferential rate. An entity could re-apply for the HNTE certificate when the prior certificate expires. Starting from 2022, Wanchunbulin is designated as the qualified HNTE and is subject to the preferential statutory tax rate of 15% for 3 years.

 

The components of loss (income) before income tax are as follows:

 

  Year Ended December 31, 
  

2021

  

2022

  

2023

 
  

$

  

$

  

$

 

Cayman Islands

  5,652   3,522   2,100 

U.S.

  34,318   13,144   8,305 

PRC

  6,368   7,253   2,674 

BVI

  18,336   12,831   8,757 

Australia

  (36)  (633)  6 
             

Loss before income tax

  64,638   36,117   21,842 

 

Income tax expenses for the years ended December 31, 2021, 2022 and 2023 are as follows:

 

  Year Ended December 31, 
  

2021

  

2022

  

2023

 
  

$

  

$

  

$

 

Current income tax

  3,570   163   106 

Deferred income tax

  -   -   - 
             

Income tax expenses

  3,570   163   106 

 

A reconciliation of the differences between income tax expenses and the amount computed by applying the U.S. Federal corporate income tax rate of 21% for the years of 2021, 2022 and 2023 are as follows. The U.S. statutory tax rate is being used as this is the jurisdiction of the primary operations:

 

  Year Ended December 31, 
  

2021

  

2022

  

2023

 
  

$

  

$

  

$

 

Loss before income tax

  64,638   36,117   21,842 
             

Expected income tax benefit

  13,574   7,585   4,566 

Tax rate difference

  (3,796)  (2,253)  (1,800)

Non-deductible expenses

  (788)  812   20 

Research tax credits

  1,096   1,437   359 

Non-taxable income

  21   -   - 

Tax preference

  3,755   (667)  (336)

Others

  (262)  (216)  389 

Current and deferred tax rate differences

  -   672   383 

Stock Compensation Expense - Windfall

  -   -   (807)

R&D super deduction

  -   389   409 

Interest expenses

  -   (315)  (523)

Change in valuation allowance

  (17,170)  (7,607)  (2,766)
             

Total income tax (expenses)

  (3,570)  (163)  (106)

 

 

BEYONDSPRING INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(Amounts in thousands of U.S. Dollars (“$”) and Renminbi (“RMB”),

except for number of shares and per share data)

 

7.

Income Taxes (continued)

 

Net deferred tax assets as of December 31, 2022 and 2023 consisted of the following:

 

  

December 31,

 
  

2022

  

2023

 
  

$

  

$

 

Deferred tax assets:

        

Net operating loss carryforward

  26,571   28,325 

Deferral of tax deduction of R&D expenses

  6,857   6,820 

Mandatory R&D Capitalization

  3,819   5,602 

Share-based compensation

  1,591   1,687 

Deferred Incentive Compensation

  -   24 

Deferred revenue

  8,630   7,699 

Research tax credits

  5,295   5,698 

Operating lease liabilities

  1,043   841 

Accruals and reserves

  21   400 

Total deferred tax assets

  53,827   57,096 
         

Deferred tax liabilities:

        

Unrealized gain

  (41)  (46)

Depreciation

  (346)  (345)

Operating lease right-of-use assets

  (1,153)  (925)

Total deferred tax liabilities

  (1,540)  (1,316)
         

Total gross deferred tax assets

  52,287   55,780 

Less: valuation allowance

  (52,287)  (55,780)
         

Net deferred tax assets

  -   - 

 

The Company operates through several subsidiaries and valuation allowances are considered for each of the subsidiaries on an individual basis. The Company recorded a valuation allowance against deferred tax assets of those subsidiaries that are individually in a three-year cumulative loss, or in a cumulative loss and not forecasting profits in the foreseeable future as of December 31, 2022 and 2023. As of December 31, 2023, the Company continues to assert indefinite reinvestment on the excess of the financial reporting bases over tax bases in the Company’s investments in foreign subsidiaries. A deferred tax liability of nil has not been established for the approximately nil of cumulative undistributed foreign earnings that may be subject to withholding taxes.

 

As of December 31, 2023, the Company had U.S. and PRC tax loss carryforwards of approximately $122,818 and $11,721, respectively. For losses incurred in the U.S. in years after December 31, 2017, the Tax Cuts and Jobs Act included a limitation on the deduction for net operating losses to 80% of current year taxable income and a provision where such losses can be carried forward indefinitely. $18,347 of loss carryforwards generated prior to 2018 are not limited in their current usage and can be carried forward for 20 years after the year they were generated. Whereas the PRC unused tax losses can be carried forward for 10 years and $11,748 will fully expire by 2027 if not utilized.

 

As of December 31, 2022 and 2023, the Company had unrecognized tax benefits of $3,634 and $3,194, respectively, of which $1,391 and $1,348, respectively, were offset against the deferred tax assets on tax losses carried forward, and the remaining amount of $2,243 and 1,846, respectively, which if ultimately recognized, would impact the effective tax rate. The gross unrecognized tax benefits for the years ended December 31, 2021, 2022 and 2023 were as follows:

 

  Year Ended December 31, 
  

2021

  

2022

  

2023

 
  

$

  

$

  

$

 

Beginning balance, as of January 1

  730   1,065   3,634 

Additions based on tax positions related to prior tax years

  283   3,099   - 

Reductions based on tax positions related to prior tax years

  -   (608)  (440)

Additions based on tax positions related to current tax year

  52   78   - 

Ending balance, as of December 31

            
   1,065   3,634   3,194 

 

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expenses. For the year ended December 31, 2021, the Company did not recognize interest and penalties accrued related to unrecognized tax benefits in income tax expenses. For the years end December 31, 2022 and 2023, the Company recognized $315 and $523 interest accrued respectively related to unrecognized tax benefits in income tax expense. The Company had approximately $518 and $1,041 in accumulated accrued interest and penalties recorded in other current liabilities as of December 31, 2022 and 2023, respectively.

 

The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly change within the next 12 months, and the fluctuation in deferred taxes would essentially be offset by a valuation allowance. The Company’s subsidiaries in the U.S., Australia and PRC filed income tax returns in the U.S., Australia and PRC, respectively. For the entities in the U.S., the tax returns are subject to U.S. federal and state income tax examination by tax authorities for tax years beginning in 2020. For the entity in Australia, the tax returns are open to examination by Australian Taxation Office for tax years beginning in 2020. For entities in the PRC, the tax returns for tax years after 2018 are open to examination by the PRC tax authorities.

 

 

BEYONDSPRING INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(Amounts in thousands of U.S. Dollars (“$”) and Renminbi (“RMB”),

except for number of shares and per share data)