GRAN TIERRA ENERGY INC.GTE
GRAN TIERRA ENERGY INC. Income Taxes Disclosure
Taxes
The income tax expense reported differs from the amount computed by applying the statutory rate to income (loss) before income taxes for the following reasons:
| Year Ended December 31, | |||||||||||||||||
| (Thousands of U.S. Dollars) | 2024 | 2023 | 2022 | ||||||||||||||
| Income (loss) before income taxes | |||||||||||||||||
| United States | $ | (51,317) | $ | (40,589) | $ | (38,161) | |||||||||||
| Foreign | 95,922 | 146,749 | 283,096 | ||||||||||||||
| 44,605 | 106,160 | 244,935 | |||||||||||||||
Statutory rate (1) | 45 | % | 45% | 35% | |||||||||||||
| Income tax expense expected | 20,072 | 47,772 | 85,727 | ||||||||||||||
| Impact of foreign taxes | 16,001 | 21,139 | 8,876 | ||||||||||||||
| Foreign currency translation | (7,090) | 39,995 | (4,641) | ||||||||||||||
| Stock-based compensation | 1,676 | 2,127 | 5,804 | ||||||||||||||
| Change in valuation allowance | 14,711 | (10,632) | 2,386 | ||||||||||||||
| Non-deductible third party royalty in Colombia | 3,631 | 3,253 | 3,422 | ||||||||||||||
| Other permanent differences | 2,205 | 8,793 | 4,332 | ||||||||||||||
Strategic Tax Optimization | (9,817) | — | — | ||||||||||||||
| Total income tax expense | $ | 41,389 | $ | 112,447 | $ | 105,906 | |||||||||||
| Effective tax rate | 93 | % | 106% | 43% | |||||||||||||
| Current income tax expense | |||||||||||||||||
| Foreign | 69,277 | 55,688 | 80,566 | ||||||||||||||
| 69,277 | 55,688 | 80,566 | |||||||||||||||
| Deferred income tax expense (recovery) | |||||||||||||||||
| Foreign | (27,888) | 56,759 | 25,340 | ||||||||||||||
| Total income tax expense | $ | 41,389 | $ | 112,447 | $ | 105,906 | |||||||||||
(1) The tax rate is the statutory rate in Colombia.
In general, it is the Company’s practice and intention to reinvest the earnings of our non-U.S. subsidiaries in such subsidiaries’ operations. As of December 31, 2024, the Company has not made a provision for U.S. or additional foreign withholding taxes on the investments in foreign subsidiaries that are indefinitely reinvested. Generally, such amounts become subject to taxation upon the remittance of dividends and under certain other circumstances.
On December 31, 2022, the Colombian Government enacted a tax reform that took effect on January 1, 2023, introducing significant changes to the income tax regime for oil companies. One of the key changes was the introduction of a surcharge on the existing 35% tax rate. This surcharge is calculated by comparing the average inflation-adjusted Brent price for the taxation year to the monthly inflation-adjusted Brent prices over the previous 120 months. If the Brent price for the taxation year exceeds the 30th percentile of this historical range, a 5% surtax applies. The surtax increases to 10% when the price surpasses the 45th percentile and to 15% when it exceeds the 60th percentile. For both 2023 and 2024, the calculation of current and deferred income tax has been based on a 10% surtax, resulting in a total tax rate of 45%.
The table below presents the components of the deferred tax liabilities and assets as at December 31, 2024 and 2023:
| As at December 31, | |||||||||||
| (Thousands of U.S. Dollars) | 2024 | 2023 | |||||||||
| Tax benefit of operating loss carryforwards | $ | 68,500 | $ | 29,448 | |||||||
Book basis in excess of tax basis | (122,031) | (86,510) | |||||||||
Foreign tax credits | 66,515 | 66,515 | |||||||||
Other accruals | 56,557 | 51,022 | |||||||||
| Deferred tax assets before valuation allowance | 69,541 | 60,475 | |||||||||
| Valuation allowance | (121,937) | (107,005) | |||||||||
Net deferred tax (liabilities) assets | $ | (52,396) | $ | (46,530) | |||||||
Deferred tax assets | 11,718 | 10,923 | |||||||||
| 11,718 | 10,923 | ||||||||||
Deferred tax liabilities | 64,114 | 57,453 | |||||||||
| 64,114 | 57,453 | ||||||||||
Net deferred tax (liabilities) assets | $ | (52,396) | $ | (46,530) | |||||||
At December 31, 2024, the Company has not recognized the benefit of unused non-capital loss carryforwards of $114.4 million (2023 - $58.8 million, 2022 - $91.3 million) for federal purposes in the United States, which expire from 2037 to 2044.
At December 31, 2024, the Company has not recognized the benefit of unused non-capital loss carryforwards of $3.3 million (2023 - $16.5 million, 2022 - $40.7 million), out of a total of $101.7 million for federal purposes in Colombia. The Company’s remaining Colombian tax losses are entitled to a carryforward period of 12 years.
At December 31, 2024, the Company has not recognized the benefit of unused non-capital loss carryforwards of $14.2 million in UK.
As at December 31, 2024, Gran Tierra had $0.8 million of unrecognized tax benefits and related interest and penalties included in its deferred tax assets and current tax liabilities on the consolidated balance sheet. The Company does not anticipate any material changes with respect to unrecognized tax benefit within the next twelve months. The Company had no other significant interest or penalties related to taxes included in the consolidated statement of operations for the year ended December 31, 2024. The Company and its subsidiaries file income tax returns in the U.S. and certain other foreign jurisdictions. The Company is subject to income tax examinations for the tax years ended 2017 through 2023 in certain jurisdictions.
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.