Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10: INCOME TAXES

a. Corporate tax structure:

i. Corporate tax rates and real capital gains tax in Israel were 23% in 2019 and  2018.

ii. The Company's German subsidiary is subject to German tax at a consolidated rate of approximately 30%.

iii. Other Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.

The Company does not provide deferred tax liabilities when it intends to reinvest earnings of foreign subsidiaries indefinitely. As of December 31, 2019, and 2018, there are no undistributed earnings of foreign subsidiaries.

b. Tax benefits under Israel's Law for the Encouragement of Industry (Taxation), 1969:

The Company may currently qualify as an "industrial company" within the definition of the Law for the Encouragement of Industry (Taxation), as such, it may be eligible for certain tax benefits, including, inter alia, special depreciation rates for machinery, equipment and buildings, amortization of patents, certain other intangible property rights and deduction of share issuance expenses.

c. Net operating loss carry-forwards:

As of December 31, 2019, Cyren's net operating loss carryforwards for tax purposes amounted to $91,682 and capital loss carryforwards of $17,846 which may be carried forward and offset against taxable income in the future, for an indefinite period.

As of December 31, 2019, the U.S. subsidiary had net operating loss carryforwards of $39,720 for federal tax purposes and $11,090 for state tax purposes. These losses may offset any future U.S. taxable income of the U.S. subsidiary and will expire in the years 2020 through 2039.

Management currently believes that based upon its estimations for future taxable income, it is more likely than not that the deferred tax assets regarding the loss carryforwards will not be utilized in the foreseeable future. Thus, a valuation allowance was provided to reduce deferred tax assets to their realizable value.

d. Deferred income taxes:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2019, and 2018, the Company's deferred taxes were in respect of the following:

	December 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	29,532		$	27,325
Capital loss carryforwards		4,105			4,099
Other		4,357			3,290
Deferred tax assets before valuation allowance		37,994			34,714
Valuation allowance		(37,044	)		(33,634	)
Deferred tax asset, net of valuation allowance		950			1,080
Deferred tax liabilities:
Intangibles		(1,497	)		(1,973	)
Temporary Differences		(249	)		(237	)
Deferred tax liability		(1,746	)		(2,210	)
Deferred tax liability, net (*)	$	(796	)	$	(1,130	)

(*) The entire amount is due to foreign deferred taxes

e. Reconciliation of the theoretical tax benefit (expense):

For the year ended December 31, 2019, the main reconciling item between the Company's statutory tax rate and the effective tax rate relates to the increase in the valuation allowance in the amount of $1,096 due to the increase in carryforward losses.

For the year ended December 31, 2018, the main reconciling item between the Company's statutory tax rate and the effective tax rate relates to the increase in the valuation allowance in the amount of $3,754 due to the increase in carryforward losses.

The statutory tax rate used in the reconciliation is the Israeli corporate tax rate.

f. Loss before tax benefit (expense) consists of the following:

	Year ended December 31,
	2019			2018
Domestic	$	(11,503	)	$	(13,570	)
Foreign		(6,627	)		(5,997	)
Loss before tax benefit (expense)	$	(18,130	)	$	(19,567	)

g. Tax benefit (expense) is comprised of the following:

	Year ended December 31,
	2019			2018
Current taxes:
Foreign	$	(204	)	$	(28	)
Domestic		-			-
	$	(204	)	$	(28	)
Deferred taxes:
Foreign	$	316		$	181
Domestic		-			-
	$	316		$	181
Tax benefit (expense), net	$	112		$	153

h. A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions is as follows:

	December 31,
	2019			2018
Beginning balance	$	354		$	272
Increases (decrease) related to tax positions taken during prior years		123			94
Effect of exchange rate		(7	)		(12	)
Ending balance	$	470		$	354

The entire amount of unrecognized tax benefits, if recognized, would reduce the Company's annual effective tax rate. Unrecognized tax benefits are presented on the consolidated balance sheets under other long-term liabilities.

i. Tax assessments:

As of December 31, 2019, the Company and certain of its subsidiaries filed Israeli and foreign income tax returns. The statute of limitations relating to the consolidated Israeli income tax return is closed for all tax years up to and including 2015.

The statute of limitations related to tax returns of the Company's U.S subsidiary is closed for all tax years up to and including 2015.

The statute of limitations related to tax returns of the Company's German subsidiary is closed for all tax years up to and including 2014.

The Company believes that it has adequately provided for reasonably foreseeable outcomes related to tax audits and settlements. The final tax outcome of any Company tax audits could be different from that which is reflected in the Company's income tax provisions and accruals. Such differences could have a material effect on the Company's income tax provision and net income (loss) in the period in which such determination is made.