Income Tax

12 Months Ended

Jun. 30, 2023

Income Tax [Abstract]

Income Tax

18. INCOME TAX

Income tax provision

The table below presents the components of (loss) income before income taxes for the years ended June 30, 2023, 2022 and 2021:

2023

2022

2021

South Africa

$

(21,308)

$

(31,266)

$

(30,825)

United States

(10,755)

(8,509)

(6,686)

Liechtenstein

-

(509)

(810)

Other

(203)

384

32,702

Loss before income taxes

$

(32,266)

$

(39,900)

$

(5,619)

18. INCOME TAX (continued)

Income tax provision (continued)

Presented below is the provision for income taxes by location of the taxing jurisdiction

for the years ended June 30, 2023, 2022

and 2021:

2023

2022

2021

Current income tax expense (benefit)

$

6,317

$

2,309

$

859

South Africa

6,317

2,309

866

United States

-

-

(75)

Other

-

-

68

Deferred taxation (benefit) charge 

(7,442)

(2,044)

6,691

South Africa

(7,490)

(2,154)

(2,039)

United States

-

-

9,136

Other

48

110

(406)

Foreign tax credits generated – United States

115

62

10

Income tax (benefit) provision

$

(2,309)

$

327

$

7,560

The South African corporate income tax rate reduced from

28

% to

27

%, effective from July 1, 2022, for all of the Company’s

South African subsidiaries with income tax years commencing on July 1, 2022. The change in the income tax rate was enacted on

January 5, 2023, and accordingly all deferred taxes assets and liabilities have been remeasured to the new tax rate. This has resulted

in the inclusion of an income tax benefit of $

1.3

 million in the Company’s income tax (benefit) expense line in its consolidated

statements of operations for each of the year ended June 30, 2023, as a result of the reversal of a portion of the deferred tax assets and

liabilities recognized as of December 31, 2022. There were

no

 changes to the enacted tax rates in the years ended June 30, 2022 and

2021.

The Company’s current income tax expense for the year ended June 30, 2023, was higher than the previous year due to the

acquisition of Connect, which is profitable and generates taxable income.

The Company’s deferred taxation (benefit) charge for the year ended June 30, 2023, was higher than the previous year due to

the inclusion of the deferred tax benefit recorded related to the amortization of intangible assets recognized due to the acquisition of

Connect. The amount for the year ended June 30, 2023, also includes a deferred tax benefit related to an expense paid by Connect

before the Company acquired the business and which subsequently determined to be deductible for tax purposes of approximately

$

2.0

 million. During the years ended June 30, 2023, 2022 and 2021, the Company incurred net operating losses through certain of its

South African wholly-owned subsidiaries and recorded a deferred taxation benefit related to these losses. However, the Company has

created a valuation allowance for certain of these net operating losses which reduced the deferred taxation benefit recorded.

A reconciliation of income taxes, calculated at the fully-distributed South African income tax rate to the Company’s effective

tax rate, for the years ended June 30, 2023, 2022 and 2021, is as follows:

2023

2022

2021

Income taxes at fully-distributed South African tax rates

27.00

%

28.00

%

28.00

%

Movement in valuation allowance

(17.66)

%

(22.05)

%

(250.16)

%

Prior year adjustments

7.60

%

0.01

%

1.77

%

Foreign tax rate differential

(0.02)

%

0.02

%

51.21

%

Change in tax laws – South Africa

4.03

%

-

 - 

-

 - 

Non-deductible items

(13.28)

%

(6.59)

%

(58.40)

%

Capital gains differential

(0.51)

%

0.11

%

93.03

%

Release from FCTR

-

 - 

(0.33)

%

-

 - 

Income tax provision

7.16

%

(0.83)

%

(134.55)

%

Percentages included in the 2022 and 2021 columns in the reconciliation of income taxes presented above are specifically impacted

by the loss incurred by the Company during the year ended June 30, 202 2 and 2021. For instance, for the year ended June 30, 2022,

the income tax provision of $

0.3

 million represents (

0.83

%) multiplied by the net loss before tax of $(

39,900

). 

18. INCOME TAX (continued)

Income tax provision (continued)

Movement in the valuation allowance for the year ended June 30, 2023, includes allowances created related to certain net operating

losses incurred during the year. Non-deductible items for the year ended June 30, 2023, includes the goodwill impairment loss

recognized and interest expense incurred which the Company cannot deduct for income tax purposes.

Movement in the valuation allowance for the year ended June 30, 2022, includes allowances created related to net operating losses

incurred during the year. Non-deductible items for the year ended June 30, 2022, includes the transaction costs related to the acquisition

of Connect.

Movement in the valuation allowance for the year ended June 30, 2021, includes allowances created related to net operating losses

incurred during the year. Non-deductible items for the year ended June 30, 2021, includes the impact of the allowance for doubtful

loans to equity -accounted investments created . The foreign tax rate differential relates primarily to the difference between the fully-

distributed South African income tax rate and the rate used (

21

%) to measure the deferred tax liability created related to the fair

adjustment to the Company’s investment in MobiKwik (refer to Note 9). The capital gains differential for the year ended June 30,

2021, represents the impact of the reversal of the deferred tax liability related to one of the Company’s equity-accounted investments

following its impairment (refer to Note 9).

Deferred tax assets and liabilities

Deferred income taxes reflect the temporary differences between the financial reporting and tax bases of assets and liabilities

using enacted tax rates in effect for the year in which the differences are expected to reverse. The primary components of the temporary

differences that gave rise to the Company’s deferred tax assets and liabilities as of June 30, and their classification, were as follows:

June 30,

June 30,

2023

2022

Total deferred tax assets

Capital losses related to investments

$

36,267

$

42,587

Net operating loss carryforwards

39,486

40,384

Foreign tax credits

32,599

32,671

Provisions and accruals

3,165

3,163

FTS patent

40

95

Other

4,217

2,063

Total deferred tax assets before valuation allowance

115,774

120,963

Valuation allowances

(109,120)

(117,101)

Total deferred tax assets, net of valuation allowance

6,654

3,862

Total deferred tax liabilities:

Intangible assets

32,731

43,876

Investments

10,354

10,354

Other

94

67

Total deferred tax liabilities

43,179

54,297

Reported as

Long-term deferred tax assets

10,315

3,776

Long-term deferred tax liabilities

46,840

54,211

Net deferred income tax liabilities

$

36,525

$

50,435

Increase in total net deferred income tax liabilities

Capital losses related to investments

Capital losses as of June 30, 2023 and 2022, comprises the capital loss arising from the difference between the amount paid for

Cell C in August 2017 and the its fair value as of the respective year end, of $

0.0

 million, and difference between the amount paid for

CPS in 2004 and the its fair value as of the respective year end, of $

0.0

 million. The change in capital losses related to investments

relates primarily to the impact of currency changes between the South African Rand against the United States dollar.

18. INCOME TAX (continued)

Deferred tax assets and liabilities (continued)

Increase in total net deferred income tax liabilities (continued)

Net operating loss carryforwards

Net operating loss carryforwards have increased due to losses incurred by certain of the Company’s subsidiaries and the impact

of currency changes between the South African Rand against the United States dollar, which was partially offset by net operating

losses carryforwards forfeited following the substantial liquidation of certain of the Company’s subsidiaries.

Intangibles assets

Intangible assets include intangible assets recognized related to the acquisition of Connect during the year ended June 30,

2022 (refer to Note 3).

Investments

Investment includes our investment in MobiKwik (refer to Note 9), and there were no adjustments to the carrying value of

investment in MobiKwik during the year ended June 30, 2023.

Decrease in valuation allowance

At June 30, 20223, the Company had deferred tax assets of $

6.7

 million (2022: $

3.9

 million), net of the valuation allowance.

Management believes, based on the weight of available positive and negative evidence it is more likely than not that the Company

will realize the benefits of these deductible differences, net of the valuation allowance. However, the amount of the deferred tax asset

considered realizable could be adjusted in the future if estimates of taxable income are revised.

At June 30, 2023, the Company had a valuation allowance of $

109.1

 million (2022: $

117.1

 million) to reduce its deferred tax

assets to estimated realizable value. The movement in the valuation allowance for the years ended June 30, 2023 and 2022, is presented

below:

Total

Capital losses

related to

investments

Net operating

loss carry-

forwards

Foreign tax

credits

Other

July 1, 2021

$

118,777

$

47,518

$

36,270

$

32,737

$

2,252

Charged to statement of operations

8,119

195

7,647

-

277

Reversed to statement of operations

(301)

-

(167)

(66)

(68)

Utilized

(1)

-

(1)

-

-

Foreign currency adjustment

(9,493)

(5,126)

(4,097)

-

(270)

June 30, 2022

117,101

42,587

39,652

32,671

2,191

Charged to statement of operations

5,916

5

5,492

-

419

Reversed to statement of operations

(1,701)

-

(579)

(510)

(612)

Change in tax rate - South Africa

(2,351)

(1,190)

(1,161)

-

-

Foreign currency adjustment

(9,845)

(5,135)

(5,023)

438

(125)

June 30, 2023

$

109,120

$

36,267

$

38,381

$

32,599

$

1,873

Net operating loss carryforwards and foreign tax credits

South Africa

Net operating loss generated are carried forward indefinitely, however, South Africa has recently enacted legislation similar to

the United States which limits the loss carryforward that may be used against future taxable income to 80% of taxable income before

the net operating loss deduction.

18. INCOME TAX (continued)

Deferred tax assets and liabilities (continued)

Decrease in valuation allowance (continued)

United States

Net operating loss generated are carried forward indefinitely, but the loss carryforward that may be used against future taxable

income is limited to 80% of taxable income before the net operating loss deduction.

As of June 30, 2023, Lesaka had net operating loss carryforwards that will expire, if unused, as follows:

Year of expiration 

U.S. net

operating loss

carry

forwards

2024

$

775

Lesaka had

no

 net unused foreign tax credits that are more likely than not to be realized as of June 30, 2023 and 2022, respectively.

Uncertain tax positions

As of June 30, 2023 and 2022, the Company had

no

 unrecognized tax benefits which would impact the Company’s effective tax

rate. The Company files income tax returns mainly in South Africa, Botswana, Namibia and in the U.S. federal jurisdiction. As of

June 30, 2023, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African

Revenue Service for periods before June 30, 2019. The Company is subject to income tax in other jurisdictions outside South Africa,

none of which are individually material to its financial position, statement of cash flows, or results of operations. The Company does

not expect the change related to unrecognized tax benefits will have a significant impact on its results of operations or financial position

in the next 12 months.