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Note 16 - Income Tax
 3 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

16.

INCOME TAX

 

The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. The statute of limitations, in general, is open for years 2014 to 2020 for tax authorities in those jurisdictions to audit or examine income tax returns. The Company is under annual review by the tax authorities of the respective jurisdiction to which the subsidiaries belong.

 

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted in fiscal year 2018, and reduced the U.S. federal corporate tax rate from 35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limited the deduction of interest expense for certain companies. The Act is a fundamental change to the taxation of multinational companies, including a shift from a system of worldwide taxation with some deferral elements to a territorial system, current taxation of certain foreign income, a minimum tax on low tax foreign earnings, and new measures to curtail base erosion and promote U.S. production.

 

Due to the enactment of the Tax Act, the Company is subject to a tax on global intangible low-taxed income (“GILTI”).  GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. The Company has elected to account for GILTI as a period cost. GILTI expense is $23 and $Nil for the period ended September 30, 2021 and September 30, 2020, respectively.

 

The Company's income tax expense was $180 and $7 for the three months ended September 30, 2021, and September 30, 2020, respectively. Our effective tax rate (“ETR”) from continuing operations was 16% and 5% for the quarter ended September 30, 2021, and September 30, 2020, respectively. The increase in income tax expense and effective tax rate was due to the following:

 

 

1.

The Singapore operations incurred higher income tax due to higher income generated in period ended September 30, 2021 compared to same period last fiscal year coupled with tax benefit, which was fully utilized in the last fiscal year.

 

2.

The Thailand operation incurred higher income tax due to higher income generated in period ended September 30, 2021 compared to same period last fiscal year.

 

3.

The Company recognized $23 of GILTI tax expenses in period ended September 30,2021 due to higher income derived from controlled foreign corporation.

 

The Company accrues penalties and interest related to unrecognized tax benefits when necessary as a component of penalties and interest expenses, respectively. The Company had no unrecognized tax benefits or related accrued penalties or interest expenses at September 30, 2021.

 

In assessing the ability to realize the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these criteria, management believes it is more likely than not the Company will not realize the benefits of the federal, state, and foreign deductible differences. Accordingly, a full valuation allowance has been established.