ONESPAWORLD HOLDINGS Ltd Income Taxes Disclosure
12. Income Taxes
Income (loss) before income tax expense (benefit) consists of (in thousands):
|
Year Ended December 31, |
|
|||||||
|
2025 |
|
2024 |
|
2023 |
|
|||
U.S. |
$ |
7,993 |
|
$ |
12,918 |
|
$ |
5,012 |
|
Foreign |
|
68,119 |
|
|
63,938 |
|
|
(9,512 |
) |
|
$ |
76,112 |
|
$ |
76,856 |
|
$ |
(4,500 |
) |
The income tax expense (benefit) consists of the following (in thousands):
|
Year Ended December 31, |
|
|||||||
|
2025 |
|
2024 |
|
2023 |
|
|||
U.S. Federal |
$ |
2,428 |
|
$ |
2,738 |
|
$ |
1,071 |
|
U.S. State |
|
601 |
|
|
969 |
|
|
369 |
|
Foreign |
|
1,465 |
|
|
285 |
|
|
(2,966 |
) |
|
|
4,494 |
|
|
3,992 |
|
|
(1,526 |
) |
Current |
|
3,587 |
|
|
2,855 |
|
|
566 |
|
Deferred |
|
907 |
|
|
1,137 |
|
|
(2,092 |
) |
|
$ |
4,494 |
|
$ |
3,992 |
|
$ |
(1,526 |
) |
A reconciliation of the difference between the expected income tax expense using the U.S. federal tax rate and our actual provision after the adoption of ASU 2023-09 is as follows:
|
Year Ended December 31, |
|
||||
|
2025 |
|
||||
|
(in thousands) |
|
Percent |
|
||
Income before income tax expense |
$ |
76,112 |
|
|
- |
|
Income tax expense at federal statutory rate |
|
15,983 |
|
|
21.00 |
% |
(a) |
|
400 |
|
|
0.53 |
% |
Foreign Tax Effects |
|
|
|
|
||
Cayman |
|
|
|
|
||
Foreign rate differential |
|
(10,103 |
) |
|
-13.27 |
% |
Bahamas |
|
|
|
|
||
Foreign rate differential |
|
(5,320 |
) |
|
-6.99 |
% |
Other |
|
2,650 |
|
|
3.48 |
% |
Effects of cross-border tax laws |
|
|
|
|
||
Foreign derived intangible income deduction |
|
(532 |
) |
|
-0.70 |
% |
Nontaxable or nondeductible items |
|
|
|
|
||
Nondeductible compensation |
|
1,579 |
|
|
2.07 |
% |
Other |
|
(666 |
) |
|
-0.88 |
% |
Other |
|
|
|
|
||
Other adjustments |
|
503 |
|
|
0.66 |
% |
Total |
$ |
4,494 |
|
|
5.90 |
% |
(a) State taxes in Florida made up the majority (greater than 50%) of the tax effect in this category.
A reconciliation of the difference between the expected income tax expense (benefit) using the U.S. federal tax rate and our actual provision prior to the adoption of ASU 2023-09 is as follows (in thousands):
|
|
|
||||
|
2024 |
|
2023 |
|
||
|
|
|
|
|
||
Provision (benefit) using statutory U.S. federal tax rate |
$ |
16,140 |
|
$ |
(945 |
) |
Foreign rate differential |
|
(11,741 |
) |
|
(5,709 |
) |
Prior period true up adjustment current taxes payable |
|
214 |
|
|
761 |
|
Prior period true up adjustment of deferred taxes |
|
319 |
|
|
2,129 |
|
State taxes |
|
485 |
|
|
460 |
|
Change in valuation allowance |
|
(30 |
) |
|
(3,971 |
) |
Permanent differences |
|
(468 |
) |
|
10,280 |
|
Reversal of contingency |
|
— |
|
|
(3,440 |
) |
Foreign derived Intangible Income (Section 250) deduction |
|
(883 |
) |
|
(1,330 |
) |
Other |
|
(44 |
) |
|
239 |
|
Total |
$ |
3,992 |
|
$ |
(1,526 |
) |
The difference between the expected provision for income taxes using the 21% U.S. federal income tax rate for 2025, 2024 and 2023, and the Company’s actual provision is primarily attributable to the foreign rate differential including income earned in jurisdictions not subject to income taxes and permanent differences.
A reconciliation of the beginning and ending amounts of uncertain tax positions, excluding interest and penalties, is as follows (in thousands):
|
2025 |
|
2024 |
|
2023 |
|
|||
Beginning balance |
$ |
— |
|
$ |
— |
|
$ |
1,663 |
|
Gross (decreases) increases—prior period tax position |
|
— |
|
|
— |
|
|
(1,663 |
) |
Ending balance |
$ |
— |
|
$ |
— |
|
$ |
— |
|
As of December 31, 2025 and 2024, the Company accrued zero for uncertain tax positions. In the third quarter of 2023, the Company filed an application of tax amnesty with the revenue authority. The amnesty application was accepted and the contingency reversed.
Deferred income taxes consist of the following (in thousands):
|
As of December 31, |
|
|||||
|
2025 |
|
|
2024 |
|
||
Deferred income tax assets: |
|
|
|
|
|
||
Stock options |
$ |
324 |
|
|
$ |
269 |
|
Inventory reserves |
|
31 |
|
|
|
41 |
|
Depreciation and amortization |
|
2,693 |
|
|
|
2,664 |
|
Other reserves and accruals |
|
425 |
|
|
|
212 |
|
Gift certificates |
|
701 |
|
|
|
626 |
|
Net operating losses |
|
1,005 |
|
|
|
993 |
|
Lease liability |
|
1,399 |
|
|
|
1,912 |
|
Total deferred income tax assets |
|
6,578 |
|
|
|
6,717 |
|
Less valuation allowance |
|
(1,254 |
) |
|
|
(1,035 |
) |
Deferred income tax asset, net |
$ |
5,324 |
|
|
$ |
5,682 |
|
Deferred income tax liabilities: |
|
|
|
|
|
||
Right of use assets |
|
(1,276 |
) |
|
|
(1,752 |
) |
Trade name |
|
(656 |
) |
|
|
(664 |
) |
Other |
|
(3,067 |
) |
|
|
(2,033 |
) |
Total deferred income tax liability |
$ |
(4,999 |
) |
|
$ |
(4,449 |
) |
Net deferred income tax asset |
$ |
325 |
|
|
$ |
1,233 |
|
Following is the activity of the valuation allowance (in thousands):
|
2025 |
|
|
2024 |
|
||
Beginning balance |
$ |
1,035 |
|
|
$ |
1,065 |
|
Additions |
|
219 |
|
|
|
- |
|
Deductions |
|
- |
|
|
|
(30 |
) |
Ending balance |
$ |
1,254 |
|
|
$ |
1,035 |
|
Income taxes paid, net of refunds received, disaggregated by jurisdiction were as follows (in thousands):
|
Year Ended December 31, 2025 |
|
|
Federal |
$ |
1,359 |
|
State |
|
526 |
|
Foreign |
|
978 |
|
Total |
$ |
2,863 |
|
Income taxes paid, net of refunds received, exceeded 5% of total income taxes paid, net of refunds received, for the following individual jurisdictions (in thousands):
|
Year Ended December 31, 2025 |
|
|
State |
|
|
|
Florida |
|
152 |
|
Foreign |
|
|
|
Italy |
|
607 |
|
United Kingdom |
|
153 |
|
As of December 31, 2025, we had $3.4 million of foreign tax operating loss carryforwards expiring as follows (in millions):
Expires |
|
|
|
2026 |
|
- |
|
2027 |
|
- |
|
2028 |
|
- |
|
2029 |
|
0.6 |
|
2030 |
|
0.5 |
|
2031 |
|
0.3 |
|
2032 |
|
0.2 |
|
2033 |
|
0.4 |
|
2034 |
|
0.6 |
|
2035 |
|
0.6 |
|
Indefinite |
|
0.2 |
|
Total |
$ |
3.4 |
|
The Company is subject to routine audits by U.S. federal, state, local and foreign tax authorities. These audits include questioning the timing and the amount of deductions and the allocation of income among various tax jurisdictions. Generally, tax years remain subject to examination by taxing authorities throughout the world in major jurisdictions, such as the U.S.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 3, 2023 | |
| 2021 | Mar 4, 2022 | |
| 2020 | Mar 10, 2021 | |
| 2019 | Mar 30, 2020 | |
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.