NXP Semiconductors N.V.NXPI
NXP Semiconductors N.V. Income Taxes Disclosure
Income Taxes
In 2025, NXP generated income before income taxes of $2,663 million (2024: income of $3,099 million; 2023: income of $3,352 million). The components of income (loss) before income taxes are as follows:
| Income (or loss) from continuing operations before income tax expense (or benefit) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | 1,263 | 1,444 | 1,398 | ||||||||||||||
| Foreign | 1,400 | 1,655 | 1,954 | ||||||||||||||
| 2,663 | 3,099 | 3,352 | |||||||||||||||
The components of income tax benefit (expense) are as follows:
| Income tax expense (or benefit) from continuing operations | 2025 | 2024 | 2023 | ||||||||||||||
| Current taxes: | |||||||||||||||||
| Domestic | (232) | (305) | (271) | ||||||||||||||
| Foreign | (301) | (512) | (519) | ||||||||||||||
| (533) | (817) | (790) | |||||||||||||||
| Deferred taxes: | |||||||||||||||||
| Domestic | (17) | 6 | 4 | ||||||||||||||
| Foreign | 25 | 266 | 263 | ||||||||||||||
| 8 | 272 | 267 | |||||||||||||||
| Total benefit (expense) for income taxes | (525) | (545) | (523) | ||||||||||||||
NXP Semiconductors N.V. is domiciled in the Netherlands and therefore the federal statutory corporate income tax rate of 25.8% of the Netherlands as a percentage of income (loss) before income taxes is used as the starting point of the effective income tax rate reconciliation and is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Statutory income tax rate in the Netherlands | 687 | 25.8 | 800 | 25.8 | 865 | 25.8 | |||||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| United States | |||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between United States and the Netherlands | (34) | (1.3) | (52) | (1.7) | (66) | (2.0) | |||||||||||||||||||||||||||||
| R&D tax credits | (47) | (1.8) | (59) | (1.9) | (66) | (2.0) | |||||||||||||||||||||||||||||
| Foreign-derived intangible income | (67) | (2.5) | (127) | (4.1) | (148) | (4.4) | |||||||||||||||||||||||||||||
| Other | 20 | 0.8 | 10 | 0.3 | 7 | 0.2 | |||||||||||||||||||||||||||||
| Taiwan | 25 | 0.9 | * | * | * | * | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | 16 | 0.6 | 27 | 0.9 | 9 | 0.3 | |||||||||||||||||||||||||||||
| Effect of Cross-border Tax Laws | 16 | 0.6 | 23 | 0.7 | — | — | |||||||||||||||||||||||||||||
| Tax Credits | (8) | (0.3) | (8) | (0.3) | (7) | (0.2) | |||||||||||||||||||||||||||||
| Changes in Valuation Allowances | 1 | — | (2) | (0.1) | (2) | (0.1) | |||||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Netherlands tax incentive | (99) | (3.7) | (113) | (3.6) | (112) | (3.3) | |||||||||||||||||||||||||||||
| Other | 13 | 0.5 | 19 | 0.6 | 15 | 0.4 | |||||||||||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | 7 | 0.3 | 28 | 0.9 | 28 | 0.8 | |||||||||||||||||||||||||||||
| Other Adjustments | (5) | (0.2) | (1) | — | 1 | 0.1 | |||||||||||||||||||||||||||||
| Effective Tax Rate | 525 | 19.7 | 545 | 17.6 | 523 | 15.6 | |||||||||||||||||||||||||||||
* The amount of the individual reconciling item during the year does not meet the 5% disaggregation threshold and is included in "Other foreign jurisdictions".
The effective income tax rate for 2025 was 19.7% compared to 17.6% for 2024. The increase was primarily driven by a different mix of income tax expense across our operating jurisdictions, as well as lower U.S. and NL tax incentives in 2025 due to a decrease in qualifying income and R&D expenses. In addition, the One Big Beautiful Bill Act was enacted in the U.S., which reduced the amount of claimable R&D tax credits. Taiwan also had higher tax expense in 2025 due to less undistributed earnings being considered indefinitely reinvested due to changes in the supply chain. These increases were partially offset by tax benefits from settlements with tax authorities.
The effective income tax rate for 2024 was 17.6% compared to 15.6% for 2023. The increase in the effective income tax rate was primarily due to a different mix of the benefit (provision) for income taxes in our operating
locations, newly enacted alternative minimum tax law (also known as Pillar Two) that is applicable in the Netherlands as per 2024, and lower U.S. tax incentives in 2024 as a result of a decrease in qualifying income. In addition, in 2023 new guidance was released by the Internal Revenue Service to clarify the treatment of specified research and experimental expenditures under Section 174.
The Company benefits from income tax holidays in certain jurisdictions which provide that we pay reduced income taxes in those jurisdictions for a fixed period of time that varies depending on the jurisdiction. The predominant income tax holiday is expected to expire at the end of 2026. The impact of this tax holiday decreased foreign income taxes by $13 million in 2025 (2024: $7 million; 2023: $13 million). The benefit of this tax holiday on net income per share (diluted) was $0.05 in 2025 (2024: $0.03; 2023: $0.05).
Deferred tax assets and liabilities
The principal components of deferred tax assets and liabilities are presented below:
| 2025 | 2024 | ||||||||||
| Operating loss and tax credit carryforwards | 343 | 250 | |||||||||
| Disallowed interest and tax incentive carryforwards | 5 | 37 | |||||||||
| Identified intangible assets, net | 769 | 791 | |||||||||
| Property, plant and equipment, net | 28 | 20 | |||||||||
| Other accrued liabilities | 162 | 211 | |||||||||
| Pensions | 38 | 53 | |||||||||
| Other non-current liabilities | 65 | 72 | |||||||||
| Share-based compensation | 10 | 11 | |||||||||
| Restructuring liabilities | 52 | 29 | |||||||||
| Receivables | 70 | 90 | |||||||||
| Inventories | 12 | 15 | |||||||||
| Total Deferred Tax Assets | 1,554 | 1,579 | |||||||||
| Valuation allowance | (176) | (140) | |||||||||
| Total Deferred Tax Assets, net of valuation allowance | 1,378 | 1,439 | |||||||||
| Undistributed earnings of foreign subsidiaries | (51) | (35) | |||||||||
| Goodwill | (147) | (132) | |||||||||
| Other current and non-current assets | (65) | (70) | |||||||||
| Total Deferred Tax Liabilities | (263) | (237) | |||||||||
| Net Deferred Tax Position | 1,115 | 1,202 | |||||||||
The classification of the deferred tax assets and liabilities in the Company’s Consolidated Balance Sheets is as follows:
| 2025 | 2024 | ||||||||||
| Deferred tax assets within non-current assets | 1,213 | 1,251 | |||||||||
| Deferred tax liabilities within other non-current liabilities | (98) | (49) | |||||||||
| 1,115 | 1,202 | ||||||||||
The Company has significant deferred tax assets resulting from net operating loss carryforwards, tax credit carryforwards and deductible temporary differences that may reduce taxable income or income taxes payable in future periods. Valuation allowances have been established for deferred tax assets based on a “more likely than not” threshold. The realization of our deferred tax assets depends on our ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The valuation allowance increased by $36 million during 2025 (2024: $4 million decrease). The valuation allowance increased due to acquisitions for an amount of $16 million, due to a current year
unrecognized tax benefit of $12 million and the remainder of the increase relates to changes in estimates of prior years' income taxes.
We consider all available evidence in forming a judgment regarding the valuation allowance as of December 31, 2025, including events that occur subsequent to year end but prior to the issuance of the financial statements. The deferred tax assets are recognized to the extent that we consider it more likely than not that these assets will be realized. In making such a determination, we consider all available positive and negative evidence, including reversal of existing temporary differences, projected future taxable income and tax planning strategies.
At December 31, 2025, tax loss carryforwards of $759 million (inclusive of $132 million of U.S. state tax losses) will expire as follows:
| Balance | Scheduled expiration | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031-2035 | later | unlimited | ||||||||||||||||||||||||||||||||||||||||||||||||
| Tax loss carryforwards | 759 | 3 | 4 | — | 28 | 34 | 34 | 68 | 588 | |||||||||||||||||||||||||||||||||||||||||||||||
This overview is excluding carried forward tax incentives of $22 million which have an unlimited expiration date.
The Company also has tax credit carryforwards of $229 million (excluding the effect of unrecognized tax benefits), which are available to offset future tax, if any, and which will expire as follows:
| Balance | Scheduled expiration | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031-2035 | later | unlimited | ||||||||||||||||||||||||||||||||||||||||||||||||
| Tax credit carryforwards | 229 | 22 | 7 | 7 | 10 | 11 | 51 | 50 | 71 | |||||||||||||||||||||||||||||||||||||||||||||||
The net income tax payable (excluding the liability for unrecognized tax benefits) as of December 31, 2025, amounted to $16 million (2024: net income tax payable of $56 million) and includes amounts directly receivable from or payable to tax authorities. The amounts of cash paid for income taxes (net of refunds) by the Company are as follows:
| Income taxes, net of refunds | 2025 | 2024 | 2023 | ||||||||||||||
| Federal (National) | 225 | 255 | 258 | ||||||||||||||
| Foreign | |||||||||||||||||
| United States | 178 | 449 | 463 | ||||||||||||||
| Japan | * | * | 64 | ||||||||||||||
| China | 42 | * | * | ||||||||||||||
| Taiwan | 42 | * | * | ||||||||||||||
| Other | 94 | 163 | 134 | ||||||||||||||
| Total | 581 | 867 | 919 | ||||||||||||||
* The amount of cash paid for income taxes (net of refunds) during the year does not meet the 5% disaggregation threshold and is included in "Other".
The Company does not indefinitely reinvest the majority of the undistributed earnings of its subsidiaries. Consequently, the Company has recognized a deferred tax liability of $51 million at December 31, 2025 (2024: $35 million) for the additional income taxes and withholding taxes payable upon the future remittances of these earnings of foreign subsidiaries. No deferred tax liability has been recorded by the Company for the undistributed earnings which are considered to be indefinitely reinvested although the timing of the reversal can
be controlled. Upon repatriation of those earnings, the Company would be subject to tax of $73 million, which is not recognized as deferred tax liability at December 31, 2025.
A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and penalties is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance as of January 1 | 203 | 186 | 173 | ||||||||||||||
| Translation differences | (1) | (1) | — | ||||||||||||||
| Lapse of statute of limitations | (7) | (2) | (3) | ||||||||||||||
| Increases from tax positions taken during prior periods | 5 | 11 | 13 | ||||||||||||||
| Decreases from tax positions taken during prior periods | — | — | (3) | ||||||||||||||
| Increases from tax positions taken during current period | 11 | 9 | 11 | ||||||||||||||
| Decreases relating to settlements with the tax authorities | (18) | — | (5) | ||||||||||||||
| Balance as of December 31 | 193 | 203 | 186 | ||||||||||||||
Of the total unrecognized tax benefits at December 31, 2025, $174 million, if recognized, would impact the effective tax rate. All other unrecognized tax benefits, if recognized, would not affect the effective tax rate as these would be offset by compensating adjustments in the Company’s deferred tax assets that would be subject to valuation allowance based on conditions existing at the reporting date.
The Company classifies interest related to an underpayment of income taxes as financial expense and penalties as income tax expense. The total related interest and penalties recorded during the year 2025 amounted to a $20 million expense (2024: $24 million expense; 2023: $16 million expense). As of December 31, 2025, the Company has recognized a liability for related interest and penalties of $74 million (2024: $55 million; 2023: $32 million).
The Company files income tax returns in the Netherlands, the United States and in various other foreign jurisdictions. Tax filings of our subsidiaries are routinely audited in the normal course of business by tax authorities around the world. Tax years that remain subject to examination by major tax jurisdictions: the Netherlands (2021-2024), Germany (2017-2024), United States (2005-2024), China (2015-2024), Taiwan (2020-2024), Thailand (2020-2024), Malaysia (2018-2024) and India (2004, 2006-2024).Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 24, 2022 | |
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.