GigaCloud Technology IncGCT
GigaCloud Technology Inc Income Taxes Disclosure
INCOME TAX
Income tax
The components of income before income taxes are as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| The U.S. | $ | 28,194 | $ | 28,279 | $ | 16,222 | |||||||||||
| Foreign | 132,996 | 112,335 | 98,773 | ||||||||||||||
| Total | $ | 161,190 | $ | 140,614 | $ | 114,995 | |||||||||||
For the years ended December 31, 2025, 2024 and 2023, the details of income tax expense are set forth below:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 7,014 | $ | 11,122 | $ | 2,286 | |||||||||||
| State | 2,361 | 4,796 | 1,358 | ||||||||||||||
| Foreign | 17,542 | 10,328 | 16,845 | ||||||||||||||
| Total current tax expense | 26,917 | 26,246 | 20,489 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (1,757) | (8,637) | 724 | ||||||||||||||
| State | (242) | (1,964) | (261) | ||||||||||||||
| Foreign | (1,100) | (839) | (65) | ||||||||||||||
| Total deferred tax expense (benefit) | (3,099) | (11,440) | 398 | ||||||||||||||
| Income tax expense | $ | 23,818 | $ | 14,806 | $ | 20,887 | |||||||||||
The reconciliation of taxes at the statutory federal rate to our provision for income taxes for the years ended December 31, 2025, 2024 and 2023 was as follows:
| Year ended December 31, | |||||||||||
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| (In thousands, except for percent) | |||||||||||
| Tax at statutory federal rate: | $ | 33,850 | 21.0 | % | |||||||
| Domestic federal: | |||||||||||
| Nontaxable and nondeductible items | (35) | — | % | ||||||||
| Changes in valuation allowances | 134 | 0.1 | % | ||||||||
| Others | (231) | (0.1) | % | ||||||||
| State tax, net of federal benefit: | 1,534 | 0.9 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Mainland China | |||||||||||
| Cross-border transfer pricing adjustment | 10,792 | 6.7 | % | ||||||||
| Others | (1,246) | (0.8) | % | ||||||||
| Hong Kong | |||||||||||
| Non-taxable offshore profit* | (16,096) | (10.0) | % | ||||||||
| Tax rate differential | (4,125) | (2.6) | % | ||||||||
| Others | 203 | 0.1 | % | ||||||||
| Germany | |||||||||||
| Tax rate differential | 1,855 | 1.2 | % | ||||||||
| Others | (861) | (0.5) | % | ||||||||
| Cayman Islands | |||||||||||
| Tax rate differential | (1,174) | (0.7) | % | ||||||||
| Other foreign jurisdictions | (1,065) | (0.7) | % | ||||||||
| Change in unrecognized tax benefits: | 283 | 0.2 | % | ||||||||
| Total | $ | 23,818 | 14.8 | % | |||||||
*Offshore sourced profits not subject to Hong Kong taxes and taxable in Mainland China as cross-border transfer pricing adjustments.
| Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
| Tax at statutory federal rate of 21% | $ | 29,529 | $ | 24,149 | |||||||
| State tax, net of federal benefit | 1,468 | 779 | |||||||||
| Tax rate differential for foreign entities | (5,392) | (1,445) | |||||||||
| Preferential tax rate | (1,795) | (322) | |||||||||
| Change in unrecognized tax benefits | 1,029 | 451 | |||||||||
| Non-deductible expenses | (126) | 5 | |||||||||
| Cross-border transfer pricing adjustment | (6,366) | (1,161) | |||||||||
| Change in valuation allowance on deferred tax assets | (197) | (817) | |||||||||
| Prior year settlements and claims | (2,411) | (554) | |||||||||
| Others | (933) | (198) | |||||||||
| Total | $ | 14,806 | $ | 20,887 | |||||||
In 2025, state and local income taxes in California, Georgia, New Jersey and Texas comprise the majority of the domestic state and local income taxes, net of federal effect category.
Deferred tax assets and deferred tax liabilities
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Net operating losses carryforwards | $ | 1,416 | $ | 2,618 | |||||||
| Inventories under the uniform capitalization (UNICAP) rules | 1,975 | 1,663 | |||||||||
| Inventory write-down | 502 | 569 | |||||||||
| Accrued expenses and other current liabilities | 1,232 | 1,003 | |||||||||
| Operating lease liabilities, current and non-current | 82,965 | 88,363 | |||||||||
| Others | 827 | 715 | |||||||||
| Less: valuation allowance | (1,416) | (2,618) | |||||||||
| Total deferred tax assets, net | 87,501 | 92,313 | |||||||||
| Tax impact of full expensing of qualified property and equipment | (3,397) | (3,763) | |||||||||
| Intangibles | (1,027) | (1,061) | |||||||||
| Operating lease right-of-use assets | (70,893) | (78,404) | |||||||||
| Total gross deferred income tax liabilities | (75,317) | (83,228) | |||||||||
| Net deferred assets | $ | 12,184 | $ | 9,085 | |||||||
The deferred taxes noted above are classified as follows in the Group’s consolidated balance sheets:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
(In thousands) | |||||||||||
| Deferred tax assets | $ | 12,981 | $ | 10,026 | |||||||
| Deferred tax liabilities | (797) | (941) | |||||||||
| Net deferred assets | $ | 12,184 | $ | 9,085 | |||||||
Changes in valuation allowance are as follows:
| Year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Balance at the beginning of the year | $ | 2,618 | $ | 2,821 | |||||||
| Additions | 211 | 392 | |||||||||
| Reversal | (1,407) | (589) | |||||||||
| Expiration | (6) | (6) | |||||||||
| Balance at the end of the year | $ | 1,416 | $ | 2,618 | |||||||
Net Operating Losses and Valuation Allowances
The net operating loss carryforwards of the Company’s subsidiaries incorporated in the U.S. amounted to $4.5 million, $4.5 million, $3.0 million as of December 31, 2025, 2024 and 2023. As of December 31, 2025, $2.8 million net operating loss carryforwards does not expire, the remainder will begin to expire in 2037. The net operating loss carryforwards of the Company’s foreign subsidiaries amounted to $4.6 million, $8.8 million and $9.7 million as of December 31, 2025, 2024 and 2023. $19 thousand, $185 thousand, $45 thousand, $52 thousand, $206 thousand, $403 thousand, $1.2 million and $4 thousand will expire if unused by December 31, 2026, 2027, 2028, 2029, 2030, 2033, 2034 and 2035, respectively. As of December 31, 2025, the net operating loss carryforwards of the Company’s foreign subsidiaries amounted to $2.5 million, do not expire.
As of December 31, 2025 , 2024 and 2023, the Group had valuation allowances of $1.4 million, $2.6 million and $2.8 million.
Unremitted Earnings
As of December 31, 2025 , 2024 and 2023 respectively, the Group has not recorded approximately $29.0 million, $19.9 million and $12.5 million of deferred tax liabilities associated with remaining unremitted foreign earnings considered indefinitely reinvested, for which foreign income and withholding taxes would be due upon repatriation.
Uncertain Tax Positions
The benefits of uncertain tax positions are recorded in the Company’s consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will sustain, if examined by taxing authorities. A recognized tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement.
As of December 31, 2025, 2024 and 2023 , the amounts of unrecognized tax benefits were $4.6 million, $4.3 million and $3.3 million, respectively, which would affect the Group’s effective income tax rate.
A reconciliation of unrecognized tax benefits is as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Unrecognized tax benefits, beginning of year | $ | 4,321 | $ | 3,302 | $ | 2,894 | |||||||||||
| Increases | 283 | 1,029 | 451 | ||||||||||||||
| Reclassified from prior-year income tax payable | — | (10) | (43) | ||||||||||||||
| Unrecognized tax benefits, end of year | $ | 4,604 | $ | 4,321 | $ | 3,302 | |||||||||||
The Group classifies interest and penalties related to uncertain tax benefits as income tax expense. Due to uncertainties under the tax law, positions taken on tax returns may be challenged and ultimately disallowed by taxing authorities. Accordingly, it may not be appropriate to reflect a position taken on the tax return when the outcome of that tax position is uncertain. For the years ended December 31, 2025, 2024 and 2023, the Group recorded the amounts of $283 thousand, $1.0 million and $408 thousand, respectively, which are related to uncertainties mainly with regards to the tax impact of transfer pricing adjustment and open interpretation of tax laws in application to our facts and circumstances. The unrecognized tax benefits balances, if recognized upon audit settlement or statute expiration, would affect the effective tax rate. The Group is currently unable to provide an estimate of a range of total amount of unrecognized tax benefits that is reasonably possible to change significantly within the next twelve months.
As of December 31, 2025, the statute of limitations remains open for U.S. federal tax returns for 2015 and following years. In non-U.S. jurisdictions, the years open to audit represent the years still open under the statute of limitations. With respect to major jurisdictions outside the United States, our subsidiaries are no longer subject to income tax audits for years before 2015.
Income Taxes Paid
| Year ended December 31, | |||||
| 2025 | |||||
(In thousands) | |||||
| U.S. federal | $ | 7,466 | |||
| U.S. state and local | |||||
| California | 1,803 | ||||
| Other | 895 | ||||
| Foreign | |||||
| Mainland China | 11,589 | ||||
| Germany | 906 | ||||
| Other | 802 | ||||
| Total | $ | 23,461 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Mar 27, 2024 | |
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.