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Taxes on Income
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
TAXES ON INCOME

NOTE 11 — TAXES ON INCOME:

 

Jeffs’ Brands and Top Rank are taxed according to Israeli tax laws. The corporate tax rate in Israel is 23%.

 

Smart Pro and Purex are taxed according to US federal and California state laws. The blended corporate tax rate is 28%.

 

Capital gains are subject to capital gain tax according to the corporate tax rate for the year during which the assets are sold.

 

For financial reporting purposes, income (loss) before taxes includes the following components:

 

   Year ended December 31 
   2022   2021   2020 
   U.S. dollars in thousands 
Israel   (2,081)   (1,096)   
-
 
Foreign   (126)   (465)   188 
                
    (2,207)   (1,561)   188 

 

Income tax expense (benefit) was as follows:

 

    Year ended December 31  
    2022     2021     2020  
Current:   U.S. dollars in thousands  
Israel   -     -     -  
Foreign     12       94       126  
Total current income tax expense     12       94       126  
Deferred:                        
Israel     -       -       -  
Foreign     (18 )     (115 )     (50 )
Total deferred tax income     (18 )     (115 )     (50 )
Total tax (benefit) expense     (6 )     (21 )     76  

  

A reconciliation of the Group’s statutory income tax rate to effective income tax rate is as follows:

 

  

December 31,

 
   2022   2021   2020 
  

U.S. dollars in thousands

 
Income (loss) before taxes on income   (2,201)   (1,561)   188 
Statutory tax rate   23%   23%   23%
Tax (tax benefit) computed at the statutory tax rate   (506)   (359)   43 
Increase (decrease) in taxes on income resulting from the following:               
Tax rate differences applicable to subsidiaries   (110)   (78)   10 
Tax losses and timing differences for which deferred taxes were not recognized   610    416    23 
Taxes on income   (6)   (21)   76 

  

Deferred taxes are comprised of the following components:

 

   Year ended December 31, 
   2022   2021 
   U.S. dollars in thousands 
Deferred tax asset          
Intangible assets   110    56 
Operating lease right of use asset   32    - 
Operating loss carryforward   890    172 
Total deferred tax assets   1,032    228 
Valuation allowance   (890)   (172)
Total deferred tax assets after valuation allowance   142    56 
           
Deferred tax liabilities          
           
Differences between tax basis and carrying value of loans   -    370 
Operating lease liability   32    - 
Total deferred tax liability   32    370 
           
Net deferred tax assets (liabilities)   110    (314)

 

Deferred tax assets on losses for tax purposes carried forward to subsequent years are recognized if utilization of the related tax benefit against a future taxable income is expected.

 

Carry forward tax losses of Jeffs’ Brands were $3,870 thousands and $747 thousands as of December 31, 2022 and 2021, respectively. Jeffs’ Brands did not record deferred tax assets in respect of these losses, as the utilization thereof is not expected to occur in the foreseeable future. There is no expiration on net operating loss carryforwards in Israel.

 

Smart Pro and Purex did not have any net operating loss carryforwards as of December 31, 2022, and 2021. net deferred tax asset is with respect to Smart Pro.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized.

 

Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.