Note 20 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

20—INCOME

TAXES

20

-

1

Income / (Loss) before income taxes

Income / (loss) before income taxes is comprised of the following:

	2016			2015			2014
France		4,936			(543	)		2,029
EDAP Inc, U.S.A.		(850	)		(380	)		(1,811	)
Other countries		358			16			(614	)
Total		4,444			(907	)		(396	)

20

-

2

Income tax (expense)/ benefit

Income tax (expense)/benefit consists of the following:

	2016			2015			2014
Current income tax expense:
France		(323	)		(712	)		(124	)
Other countries		(249	)		(55	)		(10	)
Sub-total current income tax expense		(572	)		(767	)		(133	)
Deferred income tax (expense) benefit:
France		(2	)		(4	)		(4	)
Other countries		(30	)		11			22
Sub-total deferred income tax (expense) benefit		(32	)		7			18
Total		(602	)		(759	)		(116	)

20

-

3

Deferred income taxes:

Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities reported for financial reporting purposes and such amounts as measured in accordance with tax laws. The tax effects of temporary differences which give rise to significant deferred tax assets (liabilities) are as follows:

	December 31,
	2016			2015
Net operating loss carry forwards		18,392			18,295
Elimination of intercompany profit in inventory		394			172
Elimination of intercompany profit in fixed assets		250			199
Provisions for retirement indemnities		275			262
Other items		153			335
Total deferred tax assets		19,465			19,263
Capital leases treated as operating leases for tax		(3	)		-
Other items					(4	)
Total deferred tax liabilities		(3	)		(4	)
Net deferred tax assets		19,462			19,259
Valuation allowance for deferred tax assets		(19,450	)		(19,212	)
Deferred tax assets (liabilities), net of allowance		12			47

Net operating loss carryforwards of

€19,419

thousand,

€2,642

thousand,

€910

thousand and

€30,693

thousand as of

December

31,

2016

are available at EDAP Technomed Inc., Edap Technomed Co Ltd Japan, EDAP Technomed Italia S.R.L. and EDAP TMS S.A., respectively. These net operating losses generate deferred tax assets of

€18,392

thousand. Realization of these assets is contingent on future taxable earnings in the applicable tax jurisdictions. As of

December

31,

2016,

€10,515

thousand out of these

€18,392

thousand net operating loss carry-forwards have no expiration date. The remaining tax loss carry-forwards expire in years

2016

through

2036.

In accordance with ASC

740,

a valuation allowance is recorded as realization of those amounts is not considered probable.

20

-

4

Effective tax rate

A reconciliation of differences between the statutory French income tax rate and the Company’s effective tax rate is as follows:

	2016			2015			2014
French statutory rate		33.3	%		33.3	%		33.3	%
Income of foreign subsidiaries taxed at different tax rates		(2.4	%)		3.9	%		23.5	%
Effect of net operating loss carry-forwards and valuation allowances		(2.6	%)		52.4	%		(81.3	%)
Non-taxable debt fair value variation		(27.2	%)		(83.9	%)		113.2	%
Non-deductible entertainment expenses		(4.9	%)		40.7	%		42.3	%
Effect of cancellation of intra-group positions		-			(78.3	%)		(44.2	%)
French business tax included in income tax (CVAE)		3.4	%		(16.0	%)		(31.2	%)
Other		13.9	%		(35.8	%)		(84.8	%)
Effective tax rate		13.5	%		(83.7	%)		(29.2	%)

20

-

5

Uncertainty in Income Taxes

According to ASC

740,

the Company reviewed the tax positions of each subsidiary. On

December

31,

2016

the Company believes that there is no significant uncertainty in the Company’s tax positions.

In

July

2010,

the Company was requested by the French Tax Authorities to pay the amount of

€772

thousand to comply with the European Court of Justice ruling on fair competition and illegal state aids (C-

214/07

"Commission of the European Communities vs. French Republic"). The amount was related to a state aid received by EDAP-TMS France in

1994

for the acquisition of the activities of Technomed International and included

€374,156

of late interest. The Company reversed consequently the

€50

thousand reserve that had been taken as of

December

31,

2009.

In

March

2011,

the Company engaged in a contentious procedure against the French Tax Authorities to contest this position and ask for the recuperation of the paid amounts. On

December

6,

2013,

the Company received notice from the French Administrative Courts that this contentious procedure was rejected. The Company made appeal to this decision before the French higher court (“Conseil d’Etat”). On

March

10,

2017,

the Conseil d’Etat rejected the procedure to appeal. .

The tax years that remain subject to examination by major tax jurisdictions are

2014,

2015

and

2016.

Interest and penalties on income taxes are classified as a component of the provision for income taxes. There were

no

interest or penalties in

2014,

2015

and

2016.