Income tax expense

12 Months Ended

Dec. 31, 2021

Income tax expense

Income Tax Expense

19. Income Tax Expense

NXT periodically earns revenues while operating outside of Canada in foreign jurisdictions. Payments made to NXT for services rendered to clients and branch offices in certain countries may be subject to foreign income and withholding taxes. Such taxes incurred are only recoverable in certain limited circumstances, including potential utilization in Canada as a foreign tax credit, or against future taxable earnings from the foreign jurisdictions.

Income tax expense is different from the expected amount that would be computed by applying the statutory Canadian federal and provincial income tax rates to NXT’s income (loss) before income taxes as follows:

	For the years ended December 31,
	2021			2020			2019
				(Adjusted – Note 2)			(Adjusted – Note 2)
Net loss before income taxes	$	(3,123,799	)	$	(6,028,228	)	$	3,794,709
Canadian statutory income tax rate		23.0	%		24.0	%		26.5	%
Income tax (recovery) at statutory income tax rate		(718,474	)		(1,446,775	)		1,005,598
Effect of non- deductible expenses and other items:
Stock-based compensation and other expenses		67,948			44,225			11,609
Change in statutory tax rates		(92,850	)		(131,242	)		918,821
Foreign exchange adjustments		662			29,910			82,433
Other (Expired losses)		1,206,056			258,091			43,592
Change in valuation allowance		463,342			(1,245,791	)		2,062,053
Income tax expense (recovery)		(463,342	)		1,245,791			(2,062,053	)

Effective July 1, 2020, the Province of Alberta decreased its corporate tax rate from 10% to 8%.

A valuation allowance has been provided for the Company’s deferred income tax assets due to uncertainty regarding the amount and timing of their potential future utilization, as follows:

	For the years ended December 31,
	2021			2020			2019
Net operating losses carried forward:
Canada (expiration dates 2027 to 2040)	$	8,051,504		$	7,809,363		$	6,840,817
USA (expiration dates 2022 to 2026)		248,289			1,223,212			1,494,711
Timing differences on property & equipment, Right
of Use of Assets, Lease obligations and financing costs		1,674,085			1,945,086			1,805,012
SRED Expenditures		575,747			369,522			348,341
Foreign Tax Credit		285,772			285,772			285,772
		10,835,397			11,632,955			10,774,653
Intellectual property		(3,411,411	)		(3,745,627	)		(4,133,115	)
Less valuation allowance		7,423,986			7,887,328			6,641,538
		(7,423,986	)		(7,887,328	)		(6,641,538	)