CELESTICA INCCLS
CELESTICA INC Income Taxes Disclosure
INCOME TAXES
The following is a geographical breakdown of earnings before income taxes:
| Year ended December 31 | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Domestic (Canada) income | $ | 120.9 | $ | 42.7 | $ | 7.4 | |||||||||||
| Foreign income | 862.3 | 489.5 | 298.6 | ||||||||||||||
Earnings before income taxes | $ | 983.2 | $ | 532.2 | $ | 306.0 | |||||||||||
The income tax expense (recovery) consisted of the following:
| Year ended December 31 | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income taxes (recoveries) | |||||||||||||||||
Domestic (Canada) (i) | $ | 0.2 | $ | 1.5 | $ | 1.4 | |||||||||||
| Foreign | 218.9 | 134.6 | 63.8 | ||||||||||||||
Total current income taxes (ii) (iii) | 219.1 | 136.1 | 65.2 | ||||||||||||||
| Deferred income taxes (recoveries) | |||||||||||||||||
| Domestic (Canada) | — | — | — | ||||||||||||||
| Foreign | (68.4) | (31.9) | (3.6) | ||||||||||||||
Total deferred income taxes recoveries (ii) (iii) | (68.4) | (31.9) | (3.6) | ||||||||||||||
| Income tax expense | $ | 150.7 | — | $ | 104.2 | — | $ | 61.6 | |||||||||
(i) Domestic (Canada) current income taxes for 2025 consists of a $0.2 federal income tax.
Beginning in the 2025 annual reporting, we adopted ASU 2023-09 prospectively. A reconciliation of the income tax rate based on the prospective adoption of ASU 2023-09 for 2025 is below. The Canadian federal statutory rate used is 25%. A 10% federal tax abatement is included in the "Provincial income taxes, net of federal income tax effect" line. The "Provincial income taxes, net of federal income tax effect" line is solely attributable to the province of Ontario.
| Year ended December 31, 2025 | ||||||||
| Amount | Percentage (%) | |||||||
| Earnings before income taxes | $ | 983.2 | ||||||
| Canadian federal statutory tax rate | $ | 245.8 | 25.0 | % | ||||
| Provincial income taxes, net of federal income tax effect | — | — | % | |||||
Foreign tax effects(ii) (iii): | ||||||||
| Thailand: | ||||||||
| Statutory tax rate difference | (23.4) | (2.4) | % | |||||
| Tax incentives, other than credits | (52.8) | (5.4) | % | |||||
| Withholding taxes | 35.5 | 3.6 | % | |||||
| Other | (4.4) | (0.5) | % | |||||
| U.S.: | ||||||||
| Statutory tax rate difference | (12.3) | (1.3) | % | |||||
| Change in valuation allowance | (70.6) | (7.2) | % | |||||
| Share-based and other performance-based compensation | (21.5) | (2.2) | % | |||||
| Derivatives | 14.3 | 1.5 | % | |||||
| Other | 2.6 | 0.3 | % | |||||
| Other foreign jurisdictions | 21.7 | 2.2 | % | |||||
| Change in valuation allowance | 18.6 | 1.9 | % | |||||
| Non-taxable or non-deductible items: | ||||||||
| Share-based payment awards | (24.9) | (2.5) | % | |||||
| Derivatives | (15.5) | (1.6) | % | |||||
| Other non-taxable or non-deductible items | (8.7) | (0.9) | % | |||||
| Change in unrecognized tax benefits | 46.5 | 4.7 | % | |||||
Other adjustments(iii)(iv) | (0.2) | — | % | |||||
| Income tax expense and effective tax rate | $ | 150.7 | 15.3 | % | ||||
A reconciliation of the expected income tax expense calculated using combined Canadian federal and provincial income tax rate with our income tax expense for 2024 and 2023 is as follows:
| Year ended December 31 | |||||||||||
| 2024 | 2023 | ||||||||||
| Expected statutory rate | 26.5 | % | 26.5 | % | |||||||
| Expected income tax expense calculated using expected statutory rate | $ | 141.0 | $ | 81.1 | |||||||
| Effect of foreign tax rate differences | (73.9) | (45.7) | |||||||||
| Effect of foreign exchange | (10.7) | 4.3 | |||||||||
Effect of other, including non-taxable/non-deductible items and changes to net provisions related to tax uncertainties (ii) (iii) | 26.6 | (3.3) | |||||||||
Change in valuation allowance (iii) | 21.2 | 25.2 | |||||||||
| Income tax expense | $ | 104.2 | $ | 61.6 | |||||||
(ii) These line items in the tables above include: (i) for 2025, $35.5 of withholding tax expenses in respect of repatriations from certain of our Asian subsidiaries; (ii) for 2024, $22.3 withholding tax expenses in respect of repatriations from certain of our Asian subsidiaries; and (iii) for 2023, $11.3 tax expenses arising from both withholding taxes in respect of repatriations and taxable temporary differences associated with then-anticipated repatriation of undistributed earnings from certain of our Asian subsidiaries.
(iii) These line items for 2025, 2024 and 2023 in the tables above include tax benefits related to return-to-provision adjustments for changes in estimates related to prior years based on changes in facts or circumstances (RTP Adjustments), and net adjustments for tax liabilities and uncertainties (discussed below).
(iv) Includes the tax effects of changes in tax laws or rates enacted in the current period, the effect of cross-border tax laws, and tax credits.
Our effective income tax rate can vary significantly period-to-period for various reasons, including as a result of the mix and volume of business in various tax jurisdictions within the Americas, Europe and Asia, in jurisdictions with tax holidays and tax incentives, and in jurisdictions for which no net deferred income tax assets have been recognized because management believes it is not more likely than not that future taxable profit will be available against which tax losses and deductible temporary differences could be utilized. Our effective income tax rate can also vary due to the impact of restructuring charges, foreign exchange fluctuations, operating losses, cash repatriations, and changes in our provisions related to tax uncertainties. Several jurisdictions in which we operate have enacted legislation to implement the Pillar Two Global Minimum Tax (GMT) rules released by the Organization for Economic Cooperation and Development. We may occasionally pay dividends that are subject to withholding tax from certain subsidiaries in lieu of incurring top-up taxes under the GMT rules.
During 2025, we recorded net income tax expense of $150.7, which included $68.1 of tax benefits to recognize previously unrecognized deferred tax assets in our U.S. group of subsidiaries, offset by $41.7 tax expenses for tax uncertainties relating to certain of our subsidiaries, and $35.5 of withholding tax expenses in respect of repatriations from certain of our Asian subsidiaries.
During 2024, we recorded net income tax expense of $104.2, which included $22.3 withholding tax expenses in respect of repatriations from certain of our Asian subsidiaries and $19.5 tax expenses for tax uncertainties relating to certain of our subsidiaries, offset in part by the recognition of $23.8 of deferred tax assets in our U.S. group of subsidiaries and in one of our Asian subsidiaries, and $11.8 of reversals of tax uncertainties relating to certain of our subsidiaries.
During 2023, we recorded net income tax expense of $61.6, which included $11.3 tax expenses arising from both withholding taxes in respect of repatriations and taxable temporary differences associated with the then-anticipated repatriation of undistributed earnings from certain of our Asian subsidiaries.
The components of the deferred income taxes are as follows:
| December 31 | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accounting provisions not currently deductible | $ | 135.7 | $ | 65.1 | |||||||
| Pensions and non-pension post-retirement benefits | 22.3 | 7.6 | |||||||||
| PP&E and intangibles | 30.5 | — | |||||||||
| Tax loss carryforwards | 224.1 | 357.2 | |||||||||
| Other | 77.8 | 60.8 | |||||||||
| Total gross deferred tax assets | 490.4 | 490.7 | |||||||||
| Less: valuation allowance | (353.6) | (386.0) | |||||||||
| Total net deferred tax assets | $ | 136.8 | $ | 104.7 | |||||||
| Deferred tax liabilities: | |||||||||||
| Unrealized foreign exchange gains | $ | 21.6 | $ | 16.4 | |||||||
| PP&E and intangibles | — | 50.0 | |||||||||
| Total deferred tax liabilities | $ | 21.6 | $ | 66.4 | |||||||
| Net deferred tax assets | $ | 115.2 | $ | 38.3 | |||||||
| Comprised of: | |||||||||||
| Non-current assets | $ | 156.4 | $ | 87.7 | |||||||
| Non-current liabilities | 41.2 | 49.4 | |||||||||
| $ | 115.2 | $ | 38.3 | ||||||||
The amount of tax loss carryforwards on hand at December 31, 2025 is $1,099.3 (December 31, 2024 — $1,632.9). $199.5 of these tax loss carryforwards expire between 2026 and 2045, and the remainder of the tax loss carryforwards have no expiry date. At December 31, 2025, the aggregate amount of taxable temporary differences associated with investments in subsidiaries for which we have not recognized deferred tax liabilities is $1.8 (December 31, 2024 — $42.2).
Certain countries in which we do business grant tax incentives to attract or retain our business. Our tax expense could increase if certain tax incentives from which we benefit are retracted or exhausted. A retraction could occur if we fail to satisfy the conditions on which these tax incentives are based, or if they are not renewed or replaced upon expiration. Our tax expense could also increase if tax rates applicable to us in such jurisdictions are otherwise increased, or due to changes in legislation or administrative practices. Changes in our outlook in any particular country could impact our ability to meet the required conditions.
We have been granted certain income tax incentives in Thailand including tax holidays that will expire in whole or in part at various dates during 2027 through 2029, unless extended or otherwise renegotiated. These tax exemptions are subject to certain conditions with which we intend to comply. The aggregate tax benefit arising from all of our tax incentives for 2025 was approximately $51 ($0.44 per diluted share) (2024 — approximately $44 ($0.37 per diluted share); 2023 — approximately $40 ($0.33 per diluted share)).
See note 20 for contingencies regarding Romanian income and value-added tax matter and Thailand tax matters.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Year ended December 31 | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance, beginning of year | $ | 50.0 | $ | 46.1 | |||||||
| Additions, based on current year tax positions | 0.2 | 0.2 | |||||||||
Additions, for prior years' tax positions (i) | 48.6 | 23.0 | |||||||||
| Reductions for prior years' tax positions | — | (2.7) | |||||||||
| Reductions for lapse of statute of limitations | (2.3) | (11.5) | |||||||||
Reductions due to settlements | — | (2.4) | |||||||||
| Impact of foreign exchange fluctuation | 2.8 | (2.7) | |||||||||
Balance, end of year | $ | 99.3 | $ | 50.0 | |||||||
(i) This line item in the table above for 2025 includes $41.7 tax expenses for tax uncertainties relating to certain of our subsidiaries (2024 — $19.5).
We recognize interest and penalties accrued related to unrecognized tax benefits within our tax expense. During 2025, we recognized interest and penalties of approximately $8.5 (2024 — $4.1; 2023 — de minimis). We had $17.0 accrued for the payment of interest and penalties at December 31, 2025 (December 31, 2024 —$8.5).
Information regarding income taxes paid based on the prospective adoption of ASU 2023-09 is set forth below:
Year ended December 31, 2025 | |||||
Canadian income taxes paid, net of refunds received: | |||||
| Federal | $ | 0.1 | |||
| Provincial | 0.1 | ||||
| Foreign income taxes paid, net of refunds received: | |||||
| Thailand | 95.6 | ||||
| Malaysia | 27.2 | ||||
| U.S. | 26.8 | ||||
| All other foreign jurisdictions | 25.0 | ||||
| Worldwide income taxes paid, net of refunds | $ | 174.8 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
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.