DIODES INC /DEL/ Income Taxes Disclosure

Note 12 – Income Taxes

Effective Tax Rate Reconciliation

Uncertain Tax Positions

If the $48.4 million of unrecognized tax benefits as of December 31, 2025, is recognized, approximately $46.3 million would affect the effective tax rate. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlements of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2022. We are no longer subject to China income tax examinations by tax authorities for tax years before 2014. With respect to state and local jurisdictions and countries outside of the U.S., with limited exceptions, we are no longer subject to income tax audits for years before 2019. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties, if any, have been provided for in our reserve for any adjustments that may result from future tax audits. We recognize accrued interest and penalties, if any, related to unrecognized tax benefits in interest expense. We had an immaterial amount of accrued interest and penalties at December 31, 2025, 2024, and 2023.

Deferred Taxes

ASU No. 2013-11 provides that an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The $53.1 million net deferred tax asset presented in the balance sheet as of December 31, 2025, is net of $28.8 million of unrecognized tax benefits. The $81.9 million and $64.8 million net deferred tax asset presented above for December 31, 2025 and 2024, respectively, is prior to the net balance sheet presentation required by ASU 2013-11.

At December 31, 2025, we had $1.6 million federal research credit carryforward and approximately $11.2 million of state tax credit and research credit carryforwards which are available to offset future income tax liabilities. The state tax credit carryforwards began expiring in 2025. Consistent with prior years, we determined that it is more likely than not that our state research credit carryforwards will expire before they are utilized. The valuation allowances recorded against the related deferred tax assets totaled $11.8 million and $11.3 million as of December 31, 2025 and 2024, respectively

At December 31, 2025, we had state net operating loss (“NOL”) carryforwards of approximately $1.2 million, and foreign NOL carryforwards of $274.0 million which are available to offset future taxable income. The state NOL carryforward began to expire in 2025. We determined that it is more likely than not that the state NOL carryforwards will expire before they are fully utilized and recorded a full valuation allowance on the related deferred tax assets. The foreign NOL carryforwards began expiring in 2025. We determined that it is more likely than not that a portion of the foreign NOL carryforwards will expire before they are fully utilized. The valuation allowances recorded against the related deferred tax assets totaled $11.6 million and $10.5 million as of December 31, 2025 and 2024, respectively.

Several jurisdictions in which we operate have either enacted, or announced plans to enact, legislation consistent with the Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (“Pillar Two”) which introduced a global minimum effective tax rate of 15% applied on a jurisdiction-by-jurisdiction basis. We have analyzed enacted legislation, and it did not have a material impact on our consolidated financial statements for 2025; however, we continue to monitor future tax legislative changes in the jurisdictions in which we operate in order to evaluate the impacts to the consolidated financial statements.

Supplemental Information

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. The impact of these exceptions on income tax expense is reflected within the withholding taxes line items of the effective tax rate reconciliation for the years ended December 31, 2025, 2024, and 2023. As of December 31, 2025, we had undistributed earnings from non-U.S. operations of approximately $1.3 billion (including approximately $112.7 million of restricted earnings, which are not available for dividends). Undistributed earnings of our China subsidiaries comprise $449.6 million of this total. Additional Chinese withholding taxes of approximately $49.2 million would be required should the $449.6 million of such earnings be distributed out of China as dividends.

Exclusive of one-time deferred tax charges of $0.9 million and $1.6 million for the twelve months ended December 31, 2025 and 2024, the impact of tax holidays decreased our tax expense by approximately $1.3 million, $1.1 million, and $0.7 million for the twelve months ended December 31, 2025, 2024, and 2023, respectively. There were no one-time deferred tax charges for the twelve months

ended December 31, 2023. Exclusive of the deferred tax charges, the benefit of the tax holidays on basic and diluted earnings per share was $0.03, $0.02, and $0.02 for the twelve months ended December 31, 2025, 2024, and 2023, respectively.