Cronos Group Inc.CRON
Cronos Group Inc. Income Taxes Disclosure
Income Taxes
For financial reporting purposes, income (loss) from continuing operations before income taxes includes the following components:
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Domestic income (loss) before income taxes | $ | (28,585) | $ | 58,806 | $ | (53,521) | ||||||||||||||
Foreign income (loss) before income taxes | 11,465 | (22,220) | (20,148) | |||||||||||||||||
Total income (loss) before income taxes | $ | (17,120) | $ | 36,586 | $ | (73,669) | ||||||||||||||
The income (loss) before income taxes above excludes losses from discontinued operations of nil, nil and $4,114 for the years ended December 31, 2025, 2024 and 2023, respectively.
Income tax expense (benefit) consists of the following components:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Current | ||||||||||||||||||||
Federal | $ | (8,762) | $ | (1,849) | $ | (1,941) | ||||||||||||||
Provincial | (6,606) | (1,352) | (1,489) | |||||||||||||||||
Foreign | 51 | 31 | 55 | |||||||||||||||||
Total current income tax (recovery) expense | (15,317) | (3,170) | (3,375) | |||||||||||||||||
Deferred | ||||||||||||||||||||
Federal | 1,617 | (111) | 42 | |||||||||||||||||
Provincial | 1,239 | (72) | 33 | |||||||||||||||||
Foreign | (1,730) | (83) | 70 | |||||||||||||||||
Total deferred income tax (recovery) expense | 1,126 | (266) | 145 | |||||||||||||||||
Total income tax (recovery) expense | $ | (14,191) | $ | (3,436) | $ | (3,230) | ||||||||||||||
As of December 31, 2025 and 2024, the Company’s current income taxes payable were nil and $9, respectively, related to current income tax expense. Included in other receivables as of December 31, 2025 and 2024 is $12,431 and $3,110, respectively, related to current income tax benefits.
For the year ended December 31, 2025, income tax differs from that computed using the Canadian federal statutory income tax rate of 15.0%, which is the Company’s jurisdiction of domicile. Reconciliation of the expected income tax to the effective tax rate in continuing operations is as follows:
Year ended December 31, 2025 | |||||||||||
Amount | % | ||||||||||
Canadian federal statutory rate | $ | (2,568) | 15.0 | % | |||||||
Provincial tax, net of federal benefits(i) | (5,486) | 32.0 | % | ||||||||
Foreign tax effects | |||||||||||
United States | |||||||||||
Changes in valuation allowance | (3,679) | 21.5 | % | ||||||||
Effect of change in tax laws or rates | (221) | 1.3 | % | ||||||||
Non-deductible share-based compensation | 3,739 | (21.8) | % | ||||||||
Other | 91 | (0.5) | % | ||||||||
Israel | |||||||||||
Statutory tax rate differences between Israel and Canada | 860 | (5.0) | % | ||||||||
Changes in valuation allowance | (4,087) | 23.9 | % | ||||||||
Other | 21 | (0.1) | % | ||||||||
Non-taxable or non-deductible items | |||||||||||
Non-taxable portion of capital gains | 1,185 | (6.9) | % | ||||||||
Non-deductible transaction costs | 127 | (0.7) | % | ||||||||
Other | 65 | (0.4) | % | ||||||||
Changes in valuation allowances | (4,261) | 24.7 | % | ||||||||
Effect of cross-border tax laws | 73 | (0.4) | % | ||||||||
Other | (50) | 0.3 | % | ||||||||
Income tax expense (benefit), net | $ | (14,191) | 82.9 | % | |||||||
(i)Ontario provincial taxes comprises the majority (greater than 50 percent) of the tax effect in this category.
For the years ended December 31, 2024 and December 31, 2023, income tax differs from that computed using the combined Canadian federal and provincial statutory income tax rate of 26.5%. Reconciliation of the expected income tax to the effective tax rate in continuing operations is as follows:
| 2024 | 2023 | ||||||||||
Net income (loss) before income taxes | $ | 36,586 | $ | (73,669) | |||||||
| Effective income tax rate | 26.5 | % | 26.5 | % | |||||||
Expected income tax expense (benefit) | 9,695 | (19,522) | |||||||||
| Non-taxable income (loss) | (11,138) | 1,077 | |||||||||
| Non-deductible share-based compensation | 143 | 525 | |||||||||
| Non-deductible expenses | 741 | 459 | |||||||||
| Non-deductible transaction costs | (14) | 351 | |||||||||
| Effect of provincial tax rate difference | (66) | (9) | |||||||||
| Effect of tax rates outside of Canada | 755 | 816 | |||||||||
| Effect of change in tax rates | 11,533 | 4,601 | |||||||||
Fair value gain (loss) on financial liabilities | (15) | 23 | |||||||||
| Changes in valuation allowance | (19,367) | 7,930 | |||||||||
| Capital gain on financial liabilities | — | 106 | |||||||||
Additional taxable income | 3,746 | — | |||||||||
| Other | 551 | 413 | |||||||||
| Income tax expense (benefit), net | $ | (3,436) | $ | (3,230) | |||||||
The valuation allowance recorded against the loss on discontinued operations is not reflected in the effective tax rate reconciliation presented above for continuing operations.
The following table summarizes the significant components of the Company’s deferred tax assets and liabilities:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
| Tax loss carryforwards | $ | 92,836 | $ | 96,349 | |||||||
| Interest expense carryforwards | 3,477 | 2,814 | |||||||||
| Finance lease obligation | 127 | 306 | |||||||||
| Plant and equipment | 34,224 | 32,130 | |||||||||
| Investment | 24,602 | 28,778 | |||||||||
Intangible assets | 25,708 | 36,428 | |||||||||
| Inventory | — | 419 | |||||||||
| Reserve | 348 | 1,282 | |||||||||
| R&D investment tax credits | 1,156 | 1,104 | |||||||||
Share-based compensation | 2,686 | — | |||||||||
| Other | 1,358 | 3,245 | |||||||||
| Total deferred tax assets | 186,522 | 202,855 | |||||||||
| Less valuation allowance | (184,634) | (200,284) | |||||||||
| Net deferred tax assets | $ | 1,888 | $ | 2,571 | |||||||
| Deferred tax liabilities: | |||||||||||
| Plant and equipment | (2,280) | (1,635) | |||||||||
| Intangible assets | (1,809) | (1,929) | |||||||||
| Total deferred tax liabilities | $ | (4,089) | $ | (3,564) | |||||||
The realization of deferred tax assets is dependent on the Company generating sufficient taxable income in the years that the temporary differences become deductible. A valuation allowance has been provided for the deferred tax assets that the Company determined did not meet the more-likely-than-not recognition threshold under U.S. GAAP.
As of December 31, 2025 and 2024, the Company’s valuation allowance was $184,634 and $200,284, respectively. The valuation allowance decreased by $15,650 during the year ended December 31, 2025, and decreased by $15,957 during the year ended December 31, 2024. The decrease in the valuation allowance during the year ended December 31, 2025 was primarily due to the recognition of a portion of deferred tax assets for which a valuation allowance was recorded in the prior year. The decrease in the valuation allowance during the year ended December 31, 2024, was primarily due to the recognition of a portion of deferred tax assets for which a valuation allowance was recorded in the prior year.
As of December 31, 2025, the Company had net operating losses in Canada, the U.S., and Israel available to offset future years’ taxable income of approximately $182,261, $162,932, $4,769, respectively. As of December 31, 2024, the Company had net operating losses in Canada, the U.S., and Israel available to offset future years’ taxable income of approximately $197,515, $151,279, and $17,049, respectively. The net operating losses in Canada will begin to expire, for purposes of carryforward, in fiscal year 2037. The net operating losses in the U.S. can be carried forward indefinitely for federal purposes. The net operating losses in Israel can be carried forward indefinitely.
Utilization of the net operating loss carryforwards may be subject to limitations under the tax laws applicable in each tax jurisdiction due to ownership changes that could occur in the future. These ownership changes could limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax expense. Due to the existence of the valuation allowance, limitations created by ownership changes, if any, will not impact the Company’s effective tax rate.
As of December 31, 2025, the Company has various scientific research and experimental development investment tax credit carryforwards of $4,363 related to Canadian operations, which, if not utilized, will begin to expire in 2040. Investment tax credits are recognized when realization of the tax credits is more likely than not.
The Company files federal income tax returns in Canada, Israel and the U.S. The Company has open tax years with the taxation jurisdictions. These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations and tax treaties, as they relate to the amount, timing, or inclusion of revenue and expense. As of December 31, 2025, Cronos Group Inc., is under examination with the Canadian Revenue Agency for tax years 2022 and 2023.
| Jurisdiction | Open Years | |||||||
| Canada | 2021 - 2025 | |||||||
| United States | 2022 - 2025 | |||||||
| Israel | 2022 - 2025 | |||||||
Income taxes paid (net of refunds received) were as follows:
Year ended December 31, 2025 | ||||||||
Canada federal | $ | (3,604) | ||||||
Canada provincial | (2,763) | |||||||
Foreign | ||||||||
United States | 53 | |||||||
Israel | 51 | |||||||
Total income taxes paid (received) | $ | (6,263) | ||||||
Accounting guidance clarifies the accounting for uncertain tax positions and prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, the authoritative guidance addresses the derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. Only tax positions that meet the more-likely-than-not recognition threshold may be recognized. There were no identified unrecognized tax benefits as of December 31, 2025 or December 31, 2024.
As of December 31, 2025 and 2024, deferred income taxes have not been provided for any undistributed earnings from operations outside of Canada. The foreign subsidiaries have accumulated losses and as such the amount of undistributed earnings upon which income taxes have not been provided is immaterial to these consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 26, 2021 | |
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.