UiPath, Inc.PATH
UiPath, Inc. Income Taxes Disclosure
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Income Taxes | |||||||||||
The U.S. and foreign components of income (loss) before income taxes are as follows for the periods presented (in thousands):
Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| U.S. | $ | 129,333 | $ | (136,507) | $ | (168,587) | |||||||||||
| Foreign | (28,705) | 58,407 | 92,772 | ||||||||||||||
| Income (loss) before income taxes | $ | 100,628 | $ | (78,100) | $ | (75,815) | |||||||||||
The components of the provision for income taxes are as follows for the periods presented (in thousands):
Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Current expense (benefit) | |||||||||||||||||
| Federal | $ | 70 | $ | — | $ | (106) | |||||||||||
| State | 344 | 586 | (166) | ||||||||||||||
| Foreign | 20,566 | 14,802 | 13,786 | ||||||||||||||
| Total current expense | $ | 20,980 | $ | 15,388 | $ | 13,514 | |||||||||||
| Deferred (benefit) expense | |||||||||||||||||
| Federal | (181,824) | 593 | — | ||||||||||||||
| State | (23,534) | — | — | ||||||||||||||
| Foreign | 2,676 | (20,387) | 554 | ||||||||||||||
| Total deferred (benefit) expense | $ | (202,682) | $ | (19,794) | $ | 554 | |||||||||||
| Total (benefit from) provision for income taxes | $ | (181,702) | $ | (4,406) | $ | 14,068 | |||||||||||
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for fiscal year 2026 (dollars in thousands):
Year Ended January 31, | |||||||||||
| 2026 | |||||||||||
| Amount | Rate | ||||||||||
| U.S. Federal statutory income tax rate | $ | 21,132 | 21.0 | % | |||||||
U.S. state and local income taxes, net of federal income tax effect(1) | (18,320) | (18.2) | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | 20,106 | 20.0 | % | ||||||||
| Subpart F income | 847 | 0.8 | % | ||||||||
| Tax credits: | |||||||||||
| Federal research credit | (1,400) | (1.4) | % | ||||||||
| Change in valuation allowance | (248,126) | (246.6) | % | ||||||||
| Nontaxable or non-deductible items: | |||||||||||
| Non-deductible executive compensation | 2,658 | 2.6 | % | ||||||||
| Stock-based compensation | 11,757 | 11.7 | % | ||||||||
| Other | 768 | 0.8 | % | ||||||||
| Other adjustments | 40 | — | % | ||||||||
| Foreign tax effects: | |||||||||||
| Romania: | |||||||||||
| Statutory income tax rate differential | 5,573 | 5.5 | % | ||||||||
| Nontaxable or non-deductible items: | |||||||||||
| Transfer pricing adjustment | 4,671 | 4.6 | % | ||||||||
| Other | 1,262 | 1.3 | % | ||||||||
| Excess R&D deductions | (4,978) | (4.9) | % | ||||||||
| Change in valuation allowance | 10,668 | 10.6 | % | ||||||||
| Other adjustments | 49 | — | % | ||||||||
| India | 1,159 | 1.2 | % | ||||||||
| Japan | 753 | 0.7 | % | ||||||||
| Netherlands | 1,380 | 1.4 | % | ||||||||
| U.K. | 2,187 | 2.2 | % | ||||||||
| Other foreign jurisdictions | 776 | 0.8 | % | ||||||||
| Changes in unrecognized tax benefits | 5,336 | 5.3 | % | ||||||||
| (Benefit from) provision for income taxes | $ | (181,702) | (180.6) | % | |||||||
(1) New York State and New York City taxes constitute the majority of the tax effect in this category. | |||||||||||
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for fiscal years 2025 and 2024:
Year Ended January 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Federal statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
| Foreign taxes | (11.6) | (2.0) | |||||||||
| Non-deductible expenses | (9.5) | (17.9) | |||||||||
| Stock-based compensation | (25.0) | (4.6) | |||||||||
| Valuation allowance | 62.2 | (5.7) | |||||||||
| Research and development credits | 14.7 | 18.9 | |||||||||
| Cross border tax law | (44.6) | (27.4) | |||||||||
| Other, net | (1.6) | (0.9) | |||||||||
| Effective income tax rate | 5.6 | % | (18.6) | % | |||||||
Significant components of DTAs and DTLs are as follows as of the periods presented (in thousands):
As of January 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 325,465 | $ | 317,489 | |||||||
| Accruals and reserves | 10,640 | 12,643 | |||||||||
| Stock-based compensation | 4,945 | 6,512 | |||||||||
| Deferred revenue | 14,452 | 29,376 | |||||||||
| Research and development | 50,417 | 90,110 | |||||||||
| Depreciation and amortization | — | 1,459 | |||||||||
| Lease liabilities | 14,586 | 8,255 | |||||||||
| Other | 11,405 | 6,428 | |||||||||
| Total deferred tax assets, gross | 431,910 | 472,272 | |||||||||
| Less: valuation allowance | (150,535) | (406,251) | |||||||||
| Total deferred tax assets, net of valuation allowance | 281,375 | 66,021 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | (4,479) | (1,431) | |||||||||
| Right-of-use assets | (10,886) | (5,728) | |||||||||
| Commissions | (34,677) | (30,871) | |||||||||
| Depreciation and amortization | (2,902) | — | |||||||||
Other(1) | (4,729) | (3,825) | |||||||||
| Total deferred tax liabilities | (57,673) | (41,855) | |||||||||
| Net deferred tax assets | $ | 223,702 | $ | 24,166 | |||||||
| Net deferred tax assets | $ | 233,401 | $ | 27,963 | |||||||
| Net deferred tax liabilities (included in other liabilities, non-current) | (9,699) | (3,797) | |||||||||
| Net deferred tax assets | $ | 223,702 | $ | 24,166 | |||||||
(1) Prior period amounts have been aggregated to conform to current period presentation | |||||||||||
The table below details our DTA valuation allowances and the changes therein for the periods presented (in thousands):
| Beginning Balance | Additions During the Period | Reductions During the Period | Ending Balance | ||||||||||||||||||||
Year ended January 31, 2026 | $ | 406,251 | $ | 7,699 | $ | (263,415) | $ | 150,535 | |||||||||||||||
Year ended January 31, 2025 | $ | 470,040 | $ | 17,314 | $ | (81,103) | $ | 406,251 | |||||||||||||||
For fiscal year 2026, we recorded a net decrease in valuation allowance of $255.7 million, which consists of a valuation allowance release of $204.9 million related to our U.S. entity based on our reassessment of the amount of the U.S. DTAs that are more likely than not to be realized, a net decrease of $58.5 million related to a decrease in net DTAs associated with our U.S. and India entities, and a net increase of $7.7 million related to an increase in the net DTAs associated with our Romania and U.K. entities. For fiscal year 2025, we recorded a net decrease in valuation allowance of $63.8 million, driven by the release of the U.K. DTAs.
The realization of tax benefits of net DTAs is dependent upon future levels of taxable income of an appropriate character in the periods the items are expected to be deductible or taxable. As of January 31, 2026, based on the available positive and negative evidence, including the amount of taxable income in the U.S. in recent
years and our expectations of future profits in the U.S., we now believe it is more likely than not that part of the U.S. DTA is realizable. Therefore, during fiscal year 2026, we released the $204.9 million valuation allowance associated with the U.S. DTA. We continue to maintain full valuation allowances against some U.S. state and Romania DTAs as of January 31, 2026, because we believe based on our current evaluations that it is more likely than not that these DTAs will not be realized. We intend to maintain each of these full valuation allowances until sufficient positive evidence exists to support a reversal of, or decrease in, each of the respective valuation allowances.
However, we may release our U.S. state or Romania valuation allowances in future periods if objective negative evidence of cumulative losses is no longer present and positive evidence, such as projection of future growth, supports the realization of such DTAs. Release of all or a portion of these valuation allowances would result in a decrease in the provision for income taxes in the period of the release.
As of January 31, 2026, we had U.S. federal NOLs of $662.4 million available to offset future taxable income, all of which can be carried forward indefinitely. As of January 31, 2025 we had U.S. federal NOLs of $645.8 million, all of which could be carried forward indefinitely.
As of January 31, 2026 and 2025, we had state NOLs of $941.2 million and $834.6 million, respectively, which begin expiring in 2027.
As of January 31, 2026 and 2025, we had Romania NOLs of $697.3 million and $658.2 million, respectively, which begin expiring in 2027. As of January 31, 2026 and 2025, we had Japan NOLs of none and $1.8 million, respectively, as all of the available NOLs have been used as of January 31, 2026. Additionally, as of January 31, 2026 and 2025, we had U.K. NOLs of $95.2 million and $101.7 million, respectively, which may be carried forward indefinitely.
Pursuant to Section 382 of the IRC, annual use of our U.S. NOLs may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. We determined that two such ownership changes have occurred. The first resulted in an annual limitation, independent of net unrealized built-in gains, of $0.1 million for our NOLs as of April 24, 2017 but did not result in permanent disallowance of any NOLs. The second resulted in an annual limitation, independent of net unrealized built-in gains, of $29.0 million for our NOLs as of July 9, 2020 but did not result in permanent disallowance of any NOLs.
As of January 31, 2026, we have recorded a deferred tax liability of $4.7 million associated with the undistributed earnings of our foreign subsidiaries that we no longer intend to indefinitely reinvest.
The table below details our cash paid for income taxes, net of refunds received, by jurisdiction for fiscal year 2026 (in thousands):
Year Ended January 31, | |||||
| 2026 | |||||
| U.S. federal | $ | — | |||
| U.S. state and local | 120 | ||||
| Foreign: | |||||
| France | 786 | ||||
| India | 762 | ||||
| Japan | 1,975 | ||||
| Netherlands | (755) | ||||
| Singapore | 1,511 | ||||
| U.K. | 2,723 | ||||
| Other | 2,690 | ||||
| Total foreign | 9,692 | ||||
| Total cash paid for income taxes, net of refunds | $ | 9,812 | |||
The table below details our gross unrecognized tax benefits (excluding penalties and interest) and the changes therein for the periods presented (in thousands):
Year Ended January 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Beginning unrecognized tax benefits | $ | 60,175 | $ | 504 | |||||||
| Additions based on current year tax positions | 3,335 | — | |||||||||
| (Reductions) additions for tax positions related to prior years | (34,289) | 59,671 | |||||||||
| Ending unrecognized tax benefits | $ | 29,221 | $ | 60,175 | |||||||
As of January 31, 2026, we had a reserve for gross unrecognized tax benefits totaling $32.0 million (inclusive of penalties and interest) related to income taxes, of which $6.9 million would impact the effective tax rate if recognized. Of this amount, $4.2 million pertains to uncertain tax positions, and the remainder relates to interest and penalties, which are accounted for as a component of our income tax provision. The remainder of the unrecognized tax benefits, which primarily relate to the Romanian corporate income tax audit by ANAF and bilateral transfer pricing negotiations between the U.S. and Romania (described in further detail below), would not affect the effective tax rate because the unrecognized tax benefit is recorded as a reduction in our gross deferred assets, offset by a corresponding reduction in our valuation allowance. As of January 31, 2025, we had gross unrecognized tax benefits of $60.9 million (inclusive of penalties and interest) related to income taxes, of which $1.6 million would impact the effective tax rate if recognized. Of this amount, the total liability pertaining to uncertain tax positions was $0.9 million, excluding interest and penalties. Our policy is to recognize interest and penalties associated with tax matters as part of the income tax provision. During fiscal year 2026, the penalties and interest recorded related to uncertain tax positions was not material.
Our tax positions are subject to income tax audits in multiple tax jurisdictions globally. Our estimate of the potential outcome of any uncertain tax position is subject to management's assessment of the relevant risks, facts, and circumstances existing at that time. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. However, our future results may include adjustments to estimates in the period the audits are settled, which may impact our effective tax rate. Currently, our India subsidiary is appealing the corporate income tax assessment of $1.9 million for the audit period of April 2019 through March 2021. It also has an open corporate income tax audit for the period from January 2018 through March 2024. We expect that the advance pricing agreement with the Indian tax authorities will be finalized during fiscal year 2027 and as a result, all past tax disputes and litigation for the transfer pricing matters will be closed. During fiscal year 2025, the Romanian ANAF completed a corporate income tax audit for the period from January 2018 through January 2022. Certain deductions have been disallowed, resulting in a proposed reduction of NOLs of approximately $66.7 million. We are appealing $64.3 million of the disallowance through litigation, $25.4 million of which we believe more likely than not will not be sustained.
In addition, during fiscal year 2026, the bilateral transfer pricing agreement between the U.S. and Romania has been finalized and signed, as the U.S. and Romania tax authorities have reached a mutual agreement on the transfer pricing methodology for the Cost Contribution Agreement between our U.S entity and our Romania entity for taxable years ending January 31, 2023 through January 31, 2028. The bilateral transfer pricing negotiations for our transfer pricing model between Japan and Romania are still underway, with the expectation of being finalized during the first half of fiscal year 2027, in line with the tax position we have adopted.
We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, and various international jurisdictions. Tax years 2022 and forward generally remain open for examination for federal and state tax purposes. Tax years 2019 and forward generally remain open for examination for foreign tax purposes. To the extent utilized in future years’ tax returns, NOLs at January 31, 2026 and 2025 will remain subject to examination until the respective tax year is closed.
On December 20, 2021, the OECD published the Pillar Two Model Rules defining the global minimum tax, which calls for 15% global minimum tax for multinational enterprises with an annual revenue above €750.0 million. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Various countries, including EU countries, U.K., Japan, and Australia, have implemented the Pillar Two rules to varying degrees. We assessed and concluded that the Pillar
Two Model Rules do not have a significant impact on our consolidated financial statements for fiscal year 2026. We will continue to monitor developments and evaluate potential impact on future periods.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 25, 2026 | Showing above |
| 2025 | Mar 24, 2025 | |
| 2024 | Mar 27, 2024 | |
| 2023 | Mar 24, 2023 | |
| 2022 | Apr 4, 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.