Profound Medical Corp. Income Taxes Disclosure
13 | Income taxes |
Taxes on earnings reflect the annual effective rates, including charges for interest and penalties. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts.
The components of loss before income taxes for 2025 and 2024 consist of:
2025 | 2024 | |||
| $ | | $ | |
Domestic - Canada | (43,370) |
| (28,286) | |
Foreign | 1,052 |
| 468 | |
(42,318) |
| (27,818) |
The components of (provision for) benefit from income taxes for 2025 and 2024 consist of:
2025 | 2024 | |||
| $ | | $ | |
Current |
| |||
Foreign | 231 | 144 | ||
Total current income tax expense | 231 | 144 | ||
Deferred |
| |||
Foreign | 21 | (146) | ||
Total deferred tax expense | 21 | (146) | ||
Total income tax (recovery) expense | 252 | (2) |
The income taxes paid by the Company are as follows:
2025 | 2024 | |||
| $ | | $ | |
United States | 68 |
| 193 | |
Finland | 64 | 59 | ||
132 | 252 |
The (provision for) benefit from income taxes differs from the expected amount calculated by applying the Company’s Canadian federal statutory rate to loss before income taxes for 2025 and 2024 as follows:
2025 | 2024 | |||||||
| $ | | % | | $ | | % | |
Loss before income taxes | (42,318) | — |
| (27,818) | — | |||
(Provision for) benefit from income taxes | ||||||||
Canadian federal statutory rate of 15% (2024 - 15%) | (6,348) | 15.0 | (4,173) | 15.0 | ||||
Ontario Provincial tax | (4,655) | 11.0 | (2,998) | 10.8 | ||||
Foreign tax effects | ||||||||
United States | ||||||||
Statutory tax rate differences between United States and Canada | 60 | (0.1) | 16 | — | ||||
Finland | ||||||||
Statutory tax rate differences between Finland and Canada | 2 | — | 10 | — | ||||
Germany | ||||||||
Statutory tax rate differences between Germany and Canada | 18 | — | (42) | 0.1 | ||||
Changes in valuation allowance | 9,802 | (23.2) | 7,085 | (25.5) | ||||
Non-taxable or non-deductible items | 1,097 | (2.6) | 206 | (0.7) | ||||
Other adjustments | 276 | (0.7) | (106) | 0.3 | ||||
Effective tax rate | 252 | (0.6) | (2) | — | ||||
The components of deferred tax assets and liabilities are summarized as follows:
2025 | 2024 | |||
| $ | | $ | |
Deferred tax assets: | ||||
Operating loss carry forwards | 52,152 | 43,031 | ||
SR&ED expenditure pool | 4,454 | 4,344 | ||
Benefit of Investment tax credits | 2,151 | 2,078 | ||
Excess of tax value of property and equipment over book value | 2,390 | 2,392 | ||
Long term debt | 5 | (32) | ||
Financing fees | 1,331 | 1,042 | ||
Reserves | 980 | 827 | ||
Total deferred tax assets | 63,463 | 53,682 | ||
Valuation allowance | (63,397) | (53,595) | ||
Net deferred tax assets | 66 | 87 |
Deferred income taxes reflect future tax effects of temporary differences between the tax and financial reporting basis of the Company’s assets and liabilities measured using enacted tax laws and statutory tax rates applicable to the periods when the temporary differences will affect taxable income. When necessary, deferred tax assets are reduced by a valuation allowance, if based on the weight of available positive and negative evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized. The Company has $63,397 in valuation allowance against its deferred tax assets, for the year ended December 31, 2025 (2024 - $53,595).
The Company has non-capital loss carry-forwards in Canada of approximately $204,045 which expires as follows:
| $ | |
2028 | 128 | |
2029 | 215 | |
2030 | 51 | |
2031 | 446 | |
Thereafter | 203,205 | |
Total | 204,045 |
The Company has SR&ED expenditures in Canada of approximately $17,472 as at December 31, 2025, which can be carried forward indefinitely to reduce future years’ taxable income.
The Company has approximately $3,838 of Canadian federal and provincial tax credits that are available to be applied against Canadian federal and provincial taxes otherwise payable in future years and that expire in varying amounts from 2028 to 2045.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 7, 2025 | |
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.