INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

23— INCOME TAXES

23-1     Income / (Loss) before income taxes

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

	2021	2020	2019
France	869	(2,042)	1,803
Other countries	24	854	388
Total	893	(1,188)	2,191

23-2     Income tax (expense)/ benefit

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

	2021	2020	2019
Current income tax expense:
France	(320)	(158)	(237)
Other countries	(436)	(312)	(550)
Sub-total current income tax expense	(756)	(471)	(787)
Deferred income tax (expense) benefit:
France	8	8	(1)
Other countries	556	(53)	109
Sub-total deferred income tax (expense) benefit	563	(45)	108
Total	(193)	(516)	(679)

23-3     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 by nature :

	2021	2020
Net operating loss carry forwards	13,611	14,014
Elimination of intercompany profit in inventory	182	161
Elimination of intercompany profit in fixed assets	278	244
Provisions for retirement indemnities	642	634
Capital leases treated as operating leases for tax	40	56
Other items	487	775
Total deferred tax assets	15,239	15,883
Total deferred tax liabilities	—	—
Net deferred tax assets	15,239	15,883
Valuation allowance for deferred tax assets	(14,341)	(15,508)
Deferred tax assets (liabilities), net of allowance	898	374

Net operating loss carryforwards available amount to €57,872 thousand as of December 31, 2021, of which €31,458 thousand relates to EDAP TMS SA, €23,097 thousand relates to Edap Technomed Inc., €1,466 thousand relates to Edap Technomed Co Ltd Japan, €1,806 thousand relates to EDAP Technomed Italia S.R.L and €45 thousand relates to Edap TMS Gmbh. These net operating losses generate deferred tax assets of €14,014 thousand as at December 31, 2021. Realization of these tax assets is contingent on future taxable earnings in the applicable tax jurisdictions. As of December 31, 2021, €56,407 thousand out of these €57,872 thousand net operating loss carry-forwards have no expiration date but the amount of the net operating loss carry-forward, which can be used each year to offset taxable earnings, is limited in all jurisdictions. The remaining tax loss carry-forwards expire from years 2021 through 2031. In accordance with ASC 740, a valuation allowance is established if, based on the weight of available evidence, it is more-likely-than-not that some portion or all of the deferred tax asset will not be realized.

The 2017 U.S. Tax Act was enacted on December 22, 2017. The 2017 U.S. Tax Act includes a number of changes in existing tax law which impacted our business in the U.S. Starting with tax year 2018, the U.S. corporate tax rates changed from a graduated system ranging from 15% to 39% to a flat 21% of taxable net income. For taxable net income of $100K and greater for years 2018 and following, EDAP’s U.S. subsidiary would pay significantly lower taxes than with the previous tax law.

Starting from tax year 2020, the French corporate tax rates of taxable net income gradually decreased from 28% to 25% in 2022.

23-4     Effective tax income (expense)

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

	2021	2020	2019
Theoretical income tax (expense) benefit at French statutory tax rate	(237)	333	(614)
Income of foreign subsidiaries taxed at different tax rates	(95)	9	(51)
Effect of net operating loss carry-forwards and valuation allowances	577	(858)	189
Non-taxable debt fair value variation	—	—	—
Permanent differences	(258)	(159)	(251)
Effect of cancellation of intra-group positions	(130)	152	(54)
French business tax included in income tax (CVAE)	(85)	(156)	(159)
Other	35	164	263
Effective income tax (expense) benefit	(193)	(516)	(679)

23-5     Uncertainty in Income Taxes

According to ASC 740, the Company reviewed the tax positions of each subsidiary. On December 31, 2021 the Company believes that there is no significant uncertainty in the Company’s tax positions.

The Company remains subject to examination by major tax jurisdictions.

Interest and penalties on income taxes are classified as a component of the provision for income taxes. There were no interest or penalties in 2021, 2020 and 2019.