MAGNACHIP SEMICONDUCTOR Corp Income Taxes Disclosure

The Company’s income tax expense (benefit) is composed of domestic and foreign income taxes depending on the relevant tax jurisdictions. Domestic income (loss) before income tax expense (benefit) is generated or incurred in the United States, where the parent company resides.

For the year ended December 31, 2025, the Korean permanent tax benefit of $8,499 thousand was related to the difference in statutory tax rates between Korea and the United States. The Dutch permanent tax expense of $6,317 thousand pertained to a foreign currency gain primarily derived from the unrealized foreign translation gain related to the intercompany loan granted to the Dutch subsidiary by the U.S. parent company.

For the year ended December 31, 2024, the permanent tax expense of $3,125 thousand related to intercompany debt restructuring recorded for the year ended December 31, 2024 was derived from the waiver and release of unpaid interests of the intercompany loans granted to the Company’s Korean subsidiary by the Dutch subsidiary. In connection with the waiver of unpaid interests, the related withholding tax was reversed, resulting in the recognition of income tax benefit of $172 thousand.

The Company has not recognized a deferred tax liability related to outside basis differences inherent in its foreign subsidiaries because the investments in those foreign subsidiaries within the group are essentially permanent in duration or earnings in foreign subsidiaries are intended to be indefinitely reinvested. It is not practicable to estimate the amount of deferred income taxes not recorded that are associated with those outside basis differences. If circumstances change and it becomes apparent that the undistributed earnings from foreign subsidiaries will be remitted or the parent entity will dispose of its interest in the subsidiaries in the foreseeable future, and related income taxes have not been recognized by the parent entity, the parent entity will accrue as an expense of the current period income taxes attributable to that remittance or disposition.

As of December 31, 2025 and 2024, respectively, the Company recorded a valuation allowance of $97,631 thousand and $81,653 thousand on its deferred tax assets related to temporary differences, net operating loss carry-forwards and tax credits of domestic and foreign subsidiaries.

The Company has recorded a full valuation allowance against certain foreign subsidiaries’ deferred tax assets pertaining to its related tax loss carry-forwards that are not anticipated to generate a tax benefit. The valuation allowances at December 31, 2025 and 2024 were primarily attributable to its Luxembourg subsidiary.

As of December 31, 2025, the Company had $544,010 thousand of net operating loss carry-forwards available to offset future taxable income, of which $300,051 thousand is associated with the Company’s Luxembourg subsidiary, mainly attributable to certain expenses incurred in connection with its shareholding in the Company’s Dutch subsidiary. Of the $300,051 thousand net operating loss carry-forwards, $290,352 thousand is carried forward indefinitely and the remaining $9,699 thousand expires from 2034 through 2042. The net operating loss carry-forwards retained by the Company’s U.S. parent amounts to $55,686 thousand, $5,309 thousand is carried forward indefinitely and the remaining $50,377 thousand expires at various dates through 2037. The net operating loss carry-forwards retained by the Company’s Korean subsidiary amounts to $185,997 thousand, in which $60,274 expires in 2038, $15,781 expires in 2039, and the remaining $109,942 expires in 2040.

The Company did not utilize net operating loss for the year ended December 31, 2025, but utilized net operating loss of $402 thousand for the year ended December 31, 2024. The Company also has Dutch tax credit carry-forwards of approximately $14,696 thousand as of December 31, 2025. The Dutch tax credits are carried forward to be used for an indefinite period of time.

Uncertainty in Income Taxes

The Company and its subsidiaries file income tax returns in Korea, Japan, Taiwan, and the U.S. and in various other jurisdictions. The Company is subject to income- or non-income tax examinations by tax authorities of these jurisdictions for all open tax years.

As of December 31, 2025 and 2024, the Company recorded $276 thousand and $253 thousand of unrecognized tax benefits, respectively.

No interest and penalties related to unrecognized tax benefits were recognized as of December 31, 2025 and 2024.

Income Taxes Paid (Net of Refunds) by Jurisdiction