Terra Innovatum Global N.V. Income Taxes Disclosure

Note 14. Income Taxes

 

For the year ended December 31, 2025, the Company generated income before income taxes entirely in Italy. The Company also recorded no income tax expense or benefit due to current year tax losses and valuation allowance established against the Company’s net deferred tax assets.

 

The components of the Company’s deferred tax assets and liabilities are as follows:

 

		December 31, 2025
Deferred tax assets:
Net operating loss carryforward		$	4,590
Share-based compensation			5,166
Other			27
Total deferred tax assets before valuation allowance			9,783
Valuation allowance			(9,783	)
Total deferred tax assets after valuation allowance			-
Total deferred tax (liabilities)			-
Net deferred tax assets (liabilities)		$	-

 

The future realization of the tax benefits from existing temporary differences and tax attributes ultimately depends on the existence of sufficient future taxable income. The Company assesses the realizability of its deferred tax assets at each balance sheet date. In assessing the realization of its deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers the projected future taxable income, expected reversal of existing deferred tax liabilities, and tax planning strategies in making this assessment. After consideration of all available evidence, both positive and negative, the Company determined that it is not more likely than not that its net deferred tax assets will be realized in the foreseeable future. As a result, the Company established a valuation allowance of $9,783 as of December 31, 2025.

 

The reconciliation of the Company’s statutory tax rate and effective tax rate is as follows:

 

		For The Year Ended
		December 31, 2025
		Amount				Percent
Pretax Income		$	539,524
Statutory Tax Rate (IRES)			129,486				24.0	%
Subnational Taxes (IRAP)			-				0.0	%
Change in valuation allowance			9,783				1.8	%
Nontaxable or Nondeductible Items:
Contingent liability			(134,392	)			-24.9	%
Other			(4,877	)			-0.9	%
Effective Tax Rate		$	-				0.0	%

  

The rate reconciliation uses Italy’s national statutory corporate income tax rate of 24% (IRES), which is the applicable statutory federal (national) income tax rate of the Company’s tax residency in Italy.

As of December 31, 2025, income taxes paid (net of refunds received) were $0 for federal (national) and state (subnational) jurisdictions in the Company’s tax residency in Italy and $0 for foreign jurisdictions (outside Italy).

 

As of December 31, 2025, the Company had net operating loss carryforwards in Italy of $19,124 that have an unlimited carryforward period

 

The Company records uncertain tax positions as liabilities in accordance with ASC 740-10 and adjusts these liabilities when judgment changes as a result of the evaluation of new information not previously available. Since there is complexity in some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. The calculation and assessment of the Company’s income tax exposures generally involve the uncertainties in the application of complex tax laws and regulations for federal/national, state/subnational, and foreign jurisdictions. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon local tax examination including resolutions of any related appeals or litigation on the basis of the technical merits.

 

The Company files income tax returns in Italy which is the Company’s major jurisdiction where it is subject to tax examination by local tax authorities. The Company is not currently under examination for income taxes and is not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax positions. The statute of limitations for the Company has expired for tax years prior to 2021.

 

As of December 31, 2025, the Company has not recorded any liabilities for uncertain tax positions including any related interest and penalties. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in the provision for income taxes.