24. Income taxes
Income taxes recognized in the income statements can be detailed as follows:
|
|
Year Ended December 31, |
||||
|---|---|---|---|---|---|---|
(in thousands of $) |
|
2023 |
|
2022 |
|
2021 |
Current year |
|
(9,592) |
|
(27,162) |
|
(15,224) |
Income tax prior years |
|
(2,080) |
|
(12) |
|
398 |
Current tax (expense)/benefit |
|
(11,672) |
|
(27,174) |
|
(14,826) |
|
|
|
|
|
|
|
Originating and reversal of temporary differences |
|
21,115 |
|
46,894 |
|
6,304 |
Deferred tax (expense)/benefit |
|
21,115 |
|
46,894 |
|
6,304 |
|
|
|
|
|
|
|
Total tax (expense)/benefit |
|
9,443 |
|
19,720 |
|
(8,522) |
The difference between the provision for income taxes and the amount that would result from applying the Dutch statutory tax rate to income before provision for income taxes is as follows:
|
|
Year Ended December 31, |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
(in thousands of $) |
|
2023 |
|
2022 |
|
2021 |
||||
Loss before taxes |
|
304,496 |
|
729,314 |
|
399,743 |
||||
Income tax (expense)/benefit calculated at the Dutch statutory federal income tax rates for applicable tax years 1) |
|
78,560 |
|
188,163 |
|
99,936 |
||||
Effect of intercompany asset deal/transaction |
|
396 |
|
(112,200) |
|
– |
||||
Effect of expenses not deductible in determining taxable results |
|
(2,674) |
|
(1,570) |
|
(4,441) |
||||
Effect of share based payment expenses that are not deductible in determining taxable results |
|
(43,040) |
|
(27,043) |
|
(29,925) |
||||
Effect of stock issue expenses that are not taxable in determining taxable results |
|
18,620 |
|
11,412 |
|
14,119 |
||||
Effect of concessions |
|
87,123 |
|
18,263 |
|
13,413 |
||||
Effect of change of (de)recognition of deferred tax assets on tax losses |
|
(2,282) |
|
(194) |
|
(44,232) |
||||
Effect of different tax rates in jurisdictions in which the company operates |
|
(3,509) |
|
(5,566) |
|
(2,084) |
||||
Effect of change of (de)recognition of deferred tax assets |
|
(124,457) |
|
(51,320) |
|
(50,389) |
||||
Withholding tax paid |
|
(68) |
|
– |
|
(5,076) |
||||
(Underprovided)/overprovided in prior years |
|
(2,080) |
|
(12) |
|
398 |
||||
Other |
|
2,854 |
|
(213) |
|
(241) |
||||
Income tax (expense)/benefit recognized in the consolidated statements of profit or loss |
|
9,443 |
|
19,720 |
|
(8,522) |
||||
|
||||||||||
During 2022, argenx Benelux BV transferred certain pipeline activities to argenx BV through a transfer of assets, (hereafter referred to as “asset deal”), for a total amount of $449.0 million. As a result of the asset deal, argenx Benelux BV realized a capital gain on this intellectual property, which results in the rate reconciling item categorized as “effect of intercompany asset deal/transaction”.
The available deferred tax assets relates to argenx US Inc., argenx UK Ltd and argenx Japan KK which are profitable due to the global transfer pricing model of argenx, and the deferred tax liabilities are related to argenx BV. The amount of deferred tax assets and liability by type of temporary difference can be detailed as follow:
|
|
At December 31, 2023 |
||||
|---|---|---|---|---|---|---|
(in thousands of $) |
|
Assets |
|
Liabilities |
|
Net |
Deferred tax assets/(liabilities) |
|
|
|
|
|
|
Accruals and allowances |
|
13,189 |
|
– |
|
13,189 |
Income tax benefit from excess tax deductions related to share-based payments |
|
23,310 |
|
– |
|
23,310 |
Profit in inventory |
|
52,026 |
|
– |
|
52,026 |
Other tax carryforwards |
|
6,339 |
|
– |
|
6,339 |
Property, plant and equipment |
|
2,136 |
|
(1,550) |
|
586 |
Non-current fixed assets |
|
– |
|
(5,155) |
|
(5,155) |
Other |
|
1,760 |
|
– |
|
1,760 |
Netting by taxable entity |
|
(1,549) |
|
1,550 |
|
1 |
|
|
|
|
|
|
|
Net deferred tax assets/(liabilities) |
|
97,211 |
|
(5,155) |
|
92,056 |
|
|
At December 31, 2022 |
||||
|---|---|---|---|---|---|---|
(in thousands of $) |
|
Assets |
|
Liabilities |
|
Net |
Deferred tax assets/(liabilities) |
|
|
|
|
|
|
Accruals and allowances |
|
8,884 |
|
– |
|
8,884 |
Income tax benefit from excess tax deductions related to share-based payments |
|
26,887 |
|
– |
|
26,887 |
Profit in inventory |
|
29,711 |
|
– |
|
29,711 |
R&D capitalized expense |
|
11,316 |
|
– |
|
11,316 |
Property, plant and equipment |
|
856 |
|
(549) |
|
307 |
Intangible assets |
|
– |
|
(3,430) |
|
(3,430) |
Non-current fixed assets |
|
– |
|
(4,975) |
|
(4,975) |
Other |
|
2,117 |
|
– |
|
2,117 |
Netting by taxable entity |
|
(549) |
|
549 |
|
– |
|
|
|
|
|
|
|
Net deferred tax assets/(liabilities) |
|
79,222 |
|
(8,406) |
|
70,817 |
|
|
At December 31, 2021 |
||||
|---|---|---|---|---|---|---|
(in thousands of $) |
|
Assets |
|
Liabilities |
|
Net |
Deferred tax assets/(liabilities) |
|
|
|
|
|
|
Accruals and allowances |
|
2,858 |
|
– |
|
2,858 |
Income tax benefit from excess tax deductions related to share-based payments |
|
26,026 |
|
– |
|
26,026 |
Profit in inventory |
|
3,305 |
|
– |
|
3,305 |
Property, plant and equipment |
|
532 |
|
(740) |
|
(208) |
Intangible assets |
|
– |
|
(2,714) |
|
(2,714) |
Non-current fixed assets |
|
– |
|
(3,725) |
|
(3,725) |
Other |
|
210 |
|
– |
|
210 |
Netting by taxable entity |
|
(740) |
|
740 |
|
– |
|
|
|
|
|
|
|
Net deferred tax assets/(liabilities) |
|
32,191 |
|
(6,438) |
|
25,753 |
The change in net deferred taxes recorded in the consolidated statements of financial position can be detailed as follows:
(in thousands of $) |
|
|
||
|---|---|---|---|---|
Balance at January 1, 2023 |
|
79,222 |
|
(8,406) |
Recognized in profit or loss |
|
17,685 |
|
3,430 |
Recognized in equity |
|
381 |
|
– |
Effects of change in foreign exchange rate |
|
(77) |
|
(179) |
Balance at December 31, 2023 |
|
97,211 |
|
(5,155) |
(in thousands of $) |
|
|
||
|---|---|---|---|---|
Balance at January 1, 2022 |
|
32,191 |
|
(6,438) |
Recognized in profit or loss |
|
49,075 |
|
(2,180) |
Recognized in equity |
|
(1,960) |
|
– |
Effects of change in foreign exchange rate |
|
(84) |
|
212 |
Balance at December 31, 2022 |
|
79,222 |
|
(8,406) |
(in thousands of $) |
|
|
||
|---|---|---|---|---|
Balance at January 1, 2021 |
|
15,038 |
|
(1,487) |
Recognized in profit or loss |
|
11,385 |
|
(5,082) |
Recognized in equity |
|
5,494 |
|
– |
Effects of change in foreign exchange rate |
|
274 |
|
131 |
Balance at December 31, 2021 |
|
32,191 |
|
(6,438) |
The unrecognized deferred tax asset on unused tax losses amounts to $196.1 million on December 31, 2023, compared to $189.3 million on December 31, 2022 and $203.8 million on December 31, 2021. The Company has unused tax losses carried forward for an amount of $783.3 million on December 31, 2023, compared to $756.1 million on December 31, 2022, and $789.6 million on December 31, 2021. All available tax losses carried forward are in Belgium ($750.1 million on December 31, 2023 versus $720.7 million on December 31, 2022 and $764.7 million on December 31, 2021) and the Netherlands ($33.2, million on December 31, 2023 versus $35.4 million on December 31, 2022 and $24.9 million on December 31, 2021), and do not have an expiration date based upon the applicable enacted tax legislation.
As a company active in research and development in Belgium, we expect to benefit from the innovation income deduction, or IID, in Belgium. The innovation income deduction regime allows net profits attributable to revenue from among others patented products to be taxed at a lower effective tax rate than other revenues. At the end of 2023, 2022 and 2021, we had $654.9 million, $428.8 million and $213.6 million of cumulative carry-forward IID in Belgium (argenx BV). The unrecognized deferred tax asset on IID amounts to $163.7 million on December 31, 2023, compared to $107.2 million on December 31, 2022, and $53.4 million on December 31, 2021.
Also, the unrecognized deferred tax asset on the excess depreciations on R&D costs in Belgium amounts to $278.2 million on December 31, 2023 compared to $204.7 million on December 31, 2022 and $166.3 million on December 31, 2021 (argenx BV).
Additionally, argenx BV has unrecognized deferred tax asset amounting to $106.3 million on December 31, 2023 compared to $112.2 million on December 31, 2022 on the future amortizations on IP assets.
As of December 31, 2023, the Company had an estimated $127.9 million of undistributed earnings attributable to foreign subsidiaries for which no provision for deferred tax liabilities have been recognized because the Company has control over the timing of the reversal of the temporary differences and there are no plans of distributions in the foreseeable future.