GARMIN LTD Income Taxes Disclosure

5. Income Taxes

As disclosed in Note 1 – Summary of Significant Accounting Policies, the Company adopted the requirements of ASU 2023-09 using a retrospective approach. Certain other disclosures have been recast to conform to the current period presentation, including references to Switzerland as Garmin Ltd.’s country of domicile.

The Company’s income tax provision (benefit) differs from the amount computed by applying the statutory federal income tax rate of Switzerland, Garmin Ltd.’s country of domicile, to income before income taxes. The sources and tax effects of the differences, including the impact of establishing tax contingency accruals, are as follows (the table may not foot due to rounding):

The Company recorded income tax expense of $350,648 in the year ended December 27, 2025, representing an effective tax rate of approximately 17.4%. The Company recorded income tax expense of $283,965 in the year ended December 28, 2024, representing an effective tax rate of approximately 16.7%. The Company recorded income tax benefit of $89,280 in the year ended December 30, 2023, representing an effective tax rate of approximately (7.4)%, which included income tax benefit of $181,410 recognized by the Company in the fourth quarter of 2023 related to the revaluation of Switzerland deferred tax assets due to an increase in the Schaffhausen cantonal tax rate and income tax benefit of $12,116 recognized in the fourth quarter of 2023 related to auto OEM manufacturing tax incentives in Poland.

The Company’s income before income taxes attributable to Switzerland operations was $1,401,142, $1,263,683, and $1,143,696, for the years ended December 27, 2025, December 28, 2024, and December 30, 2023, respectively. The Company’s income before income taxes attributable to non-Switzerland operations was $613,393, $431,718, and $56,660, for the years ended December 27, 2025, December 28, 2024, and December 30, 2023, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

At December 27, 2025, the Company had $31,694 of tax credit carryover compared to $29,162 at December 28, 2024. At December 27, 2025, the Company had a deferred tax asset of $29,979 related to the future tax benefit of net operating loss (NOL) carryforwards of $109,662. Included in the NOL carryforwards is $8,320 that relates to various jurisdictions and expires in periods ranging from 2026 through 2039 and $101,342 that relates to various other jurisdictions and has no expiration date. The Company has recorded a valuation allowance for a portion of its deferred tax asset relating to various tax attributes that management does not believe are more likely than not to be realized. In the future, if the Company determines, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, an adjustment to the valuation allowance will be made in the period such a determination is made.

Unrecognized tax benefits are classified as noncurrent liabilities, except for the portion that is expected to be paid within one year of the balance sheet date. The balances of net unrecognized benefits of $2,289, $4,957, and $12,824 were classified as noncurrent at December 27, 2025, December 28, 2024, and December 30, 2023, respectively. The net unrecognized tax benefits, if recognized, would reduce the effective tax rate. None of the unrecognized tax benefits are due to uncertainty in the timing of deductibility.

Interest and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax expense. At December 27, 2025, December 28, 2024, and December 30, 2023, the Company had accrued approximately $767, $1,242, and $2,127, respectively, for interest. The interest component of the reserve decreased income tax expense for the years ending December 27, 2025, December 28, 2024, and December 30, 2023 by $475, $885, and $624, respectively. The Company did not have significant amounts accrued for penalties for the years ending December 27, 2025, December 28, 2024, and December 30, 2023.

The Company files income tax returns in Switzerland, Taiwan, United Kingdom, U.S. federal jurisdiction, as well as various states, local, and other foreign jurisdictions. In its major tax jurisdictions, Switzerland, Taiwan, United Kingdom, and U.S. federal and various states, the Company is no longer subject to income tax examinations by tax authorities, with few exceptions, for years prior to 2020, 2020, 2023, and 2022, respectively.

The Company recognized reductions of income tax expense, inclusive of interest and net of deferrals, of $3,395, $2,686, and $11,473 in fiscal years ended December 27, 2025, December 28, 2024, and December 30, 2023, respectively, to reflect the expiration of statutes of limitations and releases due to audit settlement in various jurisdictions.