iQSTEL Inc Income Taxes Disclosure

NOTE 14 – PROVISION FOR INCOME TAXES

 

Income (loss) before provision for income taxes consisted of the following for the years ended December 31, 2025 and 2024:

 

		2025				2024
United States		$	(8,955,346	)		$	(5,587,111	)
Foreign			566,785				801,105
Total loss before income taxes		$	(8,388,561	)		$	(4,786,006	)

 

The following table presents a reconciliation of the income taxes presented in the Statements of Operations for the years ended December 31, 2025 and 2024:

 

		2025				2024
The federal and state income tax provision (benefit) is summarized as follows:
Current:
U.S. federal		$	10,785			$	—
State and local			3,562				—
Foreign			323,722				255,222
Total current provision for income taxes		$	338,069			$	255,222
Deferred:
U.S. federal		$	(517,250	)		$	—
State and local			—				—
Foreign			300,886				138,808
Total deferred provision for income taxes		$	(216,364	)		$	138,808
Total:
U.S. federal		$	(506,465	)		$	—
State and local			3,562				—
Foreign			624,608				394,030
Total provision for income taxes		$	121,705			$	394,030

 

The Company paid income taxes as follows for the years ended December 31, 2025 and 2024:

 

Income taxes paid:		2025				2024
Federal		$	—			$	—
Foreign - UK			289,968				279,578
State			4,485				—
Total paid during the year		$	294,453			$	279,578

 

The tax effects of temporary differences that give rise to significant components of the Company’s deferred tax assets and liabilities are as follows:

 

		2025				2024
Deferred tax assets
Interest carryforward		$	796,380			$	—
Other			17,181				—
Net operating losses			6,199,209				3,215,563
Total deferred tax assets			7,012,770				3,215,563
Valuation allowance			(6,484,923	)			(2,972,455	)
Total deferred tax assets, net		$	527,847			$	243,108
Deferred tax liabilities
Intangibles		$	(10,598	)		$	—
Property and equipment			(57,777	)			—
Total deferred tax liabilities			(68,375	)			—
Net deferred tax assets		$	459,472			$	243,108

 

The Change in the valuation allowance for the years ended December 31, was as follows:

 

		2025				2024
Balance at beginning of year		$	2,972,455			$	2,392,012
Additions charged to tax expense			3,512,468				580,443
Balance at end of year		$	6,484,923			$	2,972,455

 

ASC 740 requires a valuation allowance to reduce deferred tax assets if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

 

The Company performed a comprehensive review of its uncertain tax positions and determined that no adjustments were necessary relating to unrecognized tax benefits as of December 31, 2025 and 2024. The Company’s federal and state income tax returns are subject to examination for three years after filing and remain open to examination for those periods.

 

The components of the Company’s provision for income taxes and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded at December 31, 2025, are as follows:

		December 31,
		2025
U.S. federal statutory tax benefit on pretax loss		$	(1,761,598	)			21.0	%
State and local income taxes, net of federal benefit			3,562				0.0	%
Foreign tax effects			505,581				(6.0	)%
Switzerland
Changes in Valuation Allowance			147,839				(1.8	)%
Other			128,678				(1.6	)%
United Kingdom
Other			229,064				(2.7	)%
Changes in Valuation Allowance			3,147,091				(37.5	)%
Nontaxable or nondeductible items			860,927				(10.3	)%
Tax effect of income not subject to entity level federal income tax			(109,282	)			1.3	%
Equity Debt Settlement			512,707				(6.1	)%
Goodwill Impairment			455,396				(5.4	)%
Other			2,106				0.0	%
Other			(2,633,857	)			31.4	%
Change in 163j Interest Limitation			(2,189,057	)			26.1	%
Change in Net Operating Losses			(444,800	)			5.3	%
Total provision for income taxes		$	121,705				(1.5	)%

 

The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of December 31, 2024, are as follows:

		December 31,
		2024
Net Operating loss carryforward		$	15,392,658
Effective tax rate			21	%
Deferred tax asset			3,232,458
Foreign taxes			(16,895	)
Less: valuation allowance			(2,972,455	)
Net deferred tax asset		$	243,108

 

At December 31, 2025, the Company has approximately $15,400,000 of net operating losses (“NOL”) generated to December 31, 2025 carried forward to offset taxable income in future years which began to expire in 2023. The Company’s net operating loss carry forwards may be subject to annual limitations, which could eliminate, reduce or defer the utilization of the losses because of an ownership change as defined in Section 382 of the Internal Revenue Code. U.S. Federal tax returns are closed by statute for years through 2018. The status of state and non-U.S. tax examinations varies due to the numerous legal entities and jurisdictions in which the Company operates.