Cenntro Inc.CENN

Cenntro Inc. Income Taxes Disclosure

10-KFiled Apr 15, 20266 min read
NOTE 14 - INCOME TAXES

Australia

CEGL is subject to a tax rate of 25%.

United States

U.S. subsidiaries are subject to a federal tax rate of 21% and respective state tax rate. On December 22, 2017, the “Tax Cuts and Jobs Act” (“The 2017 Tax Act”) was enacted in the United States. Under the provisions of the Act, the U.S. corporate tax rate decreased from 34% to 21%. The 2017 Tax Act imposed a global intangible low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits.

State corporate income tax rate was 0% and 9% in Nevada and New Jersey.

Europe

Subsidiaries in Germany, Spain, Italy, Netherlands and Turkey are subject to a tax rate of 15.825%, 25%, 24%, 19% and 25%, respectively. The German tax rate presented above represents the federal corporate income tax  plus solidarity surcharge and does not include municipal trade tax, which varies by jurisdiction.

Hong Kong

In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. Effective from April 1, 2018, a two-tier corporate income tax system was officially implemented in Hong Kong, which is 8.25% for the first HK$2.0 million profits, and 16.5% for the subsequent profits, it is exempted from the Hong Kong income tax on its foreign-derived income. CEGI’s subsidiaries, CAG HK and Simachinery HK, are registered in Hong Kong as intermediate holding companies, subject to an income tax rate of 16.5% for taxable income earned in Hong Kong. Payments of dividends from Hong Kong subsidiaries to CEGI are not subject to any Hong Kong withholding tax.

PRC

Pursuant to the tax laws and regulations of the PRC, the Company’s applicable enterprise income tax (“EIT”) rate is 25%. Jiangsu Tooniu Tech Co. Limited and Hangzhou Hengzhong Tech Co., Limited qualify as Small and micro enterprises in the PRC, and are entitled to pay a reduced income tax rate of 5%.

Mexico

Cennatic Energy S. de R.L. de C.V. is subject to a tax rate of 30%.

Colombia

Starting from 2023, the income tax rate of companies in Colombia was gradually increased from 30% to 35% and remaining at 35% in 2024 and 2025. Cenntro Automotive S.A.S. and Cenntro Electric Colombia S.A.S. are subject to a tax rate of 35% for the years ended December 31, 2025 and 2024.

(1)
Income taxes

Income tax benefit for years ended December 31, 2025 and 2024 was $52,920 and $35,524.

   
December 31,
2025
    
December 31,
2024
  
             
Current tax (benefit) expense
  
$
(2,965
)
  
$
12,327
  
Deferred tax benefit
    
(49,955
)
    
(47,851
)
Total tax benefit
    
(52,920
)
    
(35,524
)
Less: tax expense of discontinued operation
    
-
      
-
  
Tax benefit of continuing operation
  
$
(52,920
)
  
$
(35,524
)

The components of losses before income taxes are summarized as follows:

   
For the Years Ended
December 31,
  
   
2025
    
2024
  
PRC
  
$
(12,000,684
)
  
$
(16,182,770
)
US
    
(26,402,024
)
    
(11,440,101
)
Europe
    
(6,604,383
)
    
(14,244,854
)
Australia
    
(27,499,020
)
    
(1,406,267
)
Others
    
(568,739
)
    
(1,670,149
)
Total losses before income taxes
    
(73,074,850
)
    
(44,944,141
)
Less: losses before income taxes for discontinued operations
    
(4,135,717
)
    
(10,795,692
 )
Losses before income taxes for continuing operations
  
$
(68,939,133
)
  
$
(34,148,449
)

Cash paid for income taxes, net of refunds, are summarized as follows. The amounts presented represent cash payments for income taxes made in the respective jurisdictions in which the Company operates.

 
  
For the Years Ended
December 31,
  
 
  
2025
    
2024
  
PRC
  
$
 -
 
$
 -
US
     -
    -
Europe
     -
    -
Australia
     -
    -
Others
     -
    -
Total
  
$
 -
 
$
 -

As the main business operations were concentrated in China, PRC statutory income tax rate was applied. The actual income tax expense reported in the consolidated statements of operations and comprehensive loss for years ended December 31, 2025 and 2024 differs from the amount computed by applying the PRC statutory income tax rate to income before income taxes due to the following:

   
For the Years Ended December 31,
  
   
2025
    
2024
  
   
Amount
    
Percentage
    
Amount
    
Percentage
  
Loss before provision for income tax
  
$
(73,074,850
)
        
$
(44,944,141
)
      
PRC statutory income tax rate
    
25
%
          
25
%
      
Income tax expense at the PRC statutory rate
    
(18,268,712
)
    
25.0
%
    
(11,236,035
)
    
25.0
%
Effect of preferential tax rate
    
549,898
      
(0.8
)%
    
121,460
      
(0.3
)%
Effect of international tax rates
    
1,067,905
      
(1.5
)%
    
999,558
      
(2.2
)%
Effect of non-deductible expenses
    
715,517
      
(1.0
)%
    
34,568
      
(0.1
)%
Effect of research and development deduction
    
(158,580
)
    
0.2
%
    
(316,368
)
    
0.7
%
Fair value change of warrant liability
    
(87,688
)
    
0.1
%
    
1,035
      
0.0
%
Impairment loss of goodwill
    
-
      
0.0
%
    
55,874
      
(0.1
)%
Effect of valuation allowance
    
16,128,740
      
(21.9
)%
    
10,304,384
      
(22.9
)%
Total income tax benefit
  
$
(52,920
)
    
0.1
%
  
$
(35,524
)
    
0.1
%
(2)
Deferred taxes liabilities, net

The tax effects of temporary differences that give rise to the deferred income tax liabilities balances as of December 31, 2025 and 2024 are as follows:

   
December
31,
2025
    
December
31,
2024
  
Deferred income tax assets:
            
Impairment loss
  
$
5,653,911
    
$
4,701,765
  
Change in fair value of financial instrument
    
3,680,165
      
1,183,965
  
Capitalization of research and experimental costs
    
850,838
      
-
  
Amortization of research and experimental expenses in United States
    
-
      
1,073,895
  
Net operating loss carry forwards
    
55,282,430
      
43,534,620
  
Lease liabilities
    
84,428
      
-
  
Accrued expenses
    
(138,794
)
    
-
  
Total deferred income tax assets
    
65,412,978
      
50,494,245
  
Valuation allowance
    
(65,412,978
)
    
(50,494,245
)
Deferred income tax assets, net
  
$
-
    
$
-
  
 
                
Deferred tax liabilities:
                
Assets valuation increase from acquisition
    
(142,312
)
    
(171,558
)
Total deferred tax liabilities
    
(142,312
)
    
(171,558
)
 
                
Net deferred tax liabilities
    
(142,312
)
    
(171,558
)

The valuation allowances as of December 31, 2025 and 2024 were provided for the deferred income tax assets of certain subsidiaries, which were at cumulative loss positions. In assessing the realization of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or utilizable.

For entities incorporated in Hong Kong, net losses of $3,483,667 can be carried forward indefinitely.

For entities incorporated in the U.S., federal net operating losses of $72,118,331 can be carried forward indefinitely subject to a limitation in utilization against 80% of annual taxable income. Federal net operating losses of $3,740,668, $1,430,246, $744,848, and $1,512,798 will expire if unused by 2035, 2036, 2037 and 2038, respectively.

For entities incorporated in the PRC, net losses can be carried forward for five years.  PRC net losses of $48,778,303 were available to offset future taxable income. Net losses of $2,182,986, $5,393,901, $10,451,706, $13,134,121 and $12,302,644 will expire, if unused, by 2025, 2026, 2027, 2028 and 2029, respectively.

For entities incorporated in German, net losses of $39,831,028 can be carried forward indefinitely.

For entities incorporated in Australia, net losses of $60,900,732 can be carried forward indefinitely.

Internal Revenue Code of 1986, as amended (“IRC”), Section 382 provides that, after an ownership change, the amount of a loss corporation’s taxable income for any post-change year that may be offset by pre-change losses shall not exceed the IRC Section 382 limitation for that year. The IRC Section 382 limitation generally equals the fair market value of the old loss corporation multiplied by the long-term tax-exempt rate. A loss corporation is any corporation that has a net operating loss, a net operating loss carryforward, or a net unrealized built-in loss for the taxable year in which the ownership change occurs. An ownership change is a greater than 50-percentage point increase in ownership by five-percent shareholders.

The Company has not yet performed an IRC Section 382 analysis to determine whether an ownership change has occurred and whether any tax attributes are limited. The Company has recorded a full valuation allowance against its deferred tax assets and does not expect to utilize its tax attributes. Once the Company utilizes its tax attributes, a complete IRC Section 382 analysis will be performed.

Uncertain tax positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2025 and 2024, the Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefits. The Company does not believe that its uncertain tax benefits position will materially change over the next twelve months.

Historical Timeline

Fiscal YearFiled
2025Apr 15, 2026Showing above
2024Apr 1, 2025
2023Apr 1, 2024
2022Jun 30, 2023

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

PP&EGoodwill & IntangiblesLeasesCommitmentsStock CompensationNew StandardsPay vs Performance