Taxes

12 Months Ended

Dec. 31, 2019

The income tax expense reported differs from the amount computed by applying the statutory rate to loss before income taxes for the following reasons:



	Year Ended December 31,
(Thousands of U.S. Dollars)	2019			2018			2017
Income (loss) before income taxes
United States	$	(27,984	)	$	(14,610	)	$	(51,215	)
Foreign	123,959			166,097			88,545
	95,975			151,487			37,330
Statutory rate ⁽¹⁾	33		%	37		%	35		%
Income tax expense expected	31,672			56,050			13,066
Impact of foreign taxes	9,387			7,011			12,310
Foreign currency translation	11,527			10,336			(118		)
Other local taxes	504			524			1,056
Stock-based compensation	430			324			2,001
Change in valuation allowance	3,429			(21,954		)	52,269
Non-deductible third party royalty in Colombia	2,240			3,194			3,194
Other permanent differences	(1,904		)	(6,614		)	(14,740		)
Total income tax expense	$	57,285		$	48,871		$	69,038

Effective tax rate	60		%	32		%	185		%

Current income tax expense
United States	$	—		$	—		$	3,457
Foreign	17,058			43,903			20,865
	17,058			43,903			24,322
Deferred income tax expense
Foreign	40,227			4,968			44,716
Total income tax expense	$	57,285		$	48,871		$	69,038

⁽¹⁾ The tax rate in 2019 and 2018 is the statutory rate in Colombia. The tax rate in 2017 is the statutory rate in the U.S.

In general, it is the Company's practice and intention to reinvest the earnings of our non-U.S. subsidiaries in such subsidiaries' operations. As of December 31, 2019, the Company has not made a provision for U.S. or additional foreign withholding taxes on the investments in foreign subsidiaries that are indefinitely reinvested. Generally, such amounts become subject to taxation upon the remittance of dividends and under certain other circumstances.

In the fourth quarter of 2019, the Colombia government enacted a new tax reform to replace the 2018 tax reform, which was overturned by the Colombian Constitutional Court. This new tax reform maintains the same corporate tax rates that were approved

by Congress in 2018. The enacted corporate tax rates are 32% for 2020, 31% for 2021 and 30% for 2022 and onwards. The tax rates applied to the calculation of deferred income taxes, before valuation allowances, have been adjusted to reflect these changes.



	As at December 31,
(Thousands of U.S. Dollars)	2019			2018
Deferred tax assets
Tax benefit of operating loss carryforwards	$	73,096		$	51,042
Tax basis in excess of book basis	544			8,854
Foreign tax credits and other accruals	76,720			79,820
Tax benefit of capital loss carryforwards	22,710			32,737
Deferred tax assets before valuation allowance	173,070			172,453
Valuation allowance	(129,067		)	(127,016		)
	44,003			45,437
Deferred tax liabilities	59,762			23,419
Net deferred tax (liabilities) assets	$	(15,759	)	$	22,018

At December 31, 2019, the Company has not recognized the benefit of unused non-capital loss carryforwards of $50.5 million (2018 - $22.7 million) for federal purposes in the United States, which expire from 2029 to 2039.

At December 31, 2019, the Company has not recognized the benefit of unused non-capital loss carryforwards of $31.5 million

(2018 - $27.1 million) for federal and provincial purposes in Canada, which expire from 2025 to 2039. The Company has not recognized the benefit of capital loss carry forwards of $197.5 million (2018 - $242.4 million) for federal and provincial purposes in Canada which can be carried forward indefinitely.

At December 31, 2019, the Company has recognized the benefit of unused non-capital loss carryforwards of $140.5 million (2018 - $99.0 million), out of a total of $159.2 million and tax credits of $1.5 million (2018 - $2.2 million), out of a total of $3.3 million, for federal purposes in Colombia. As a result of the 2016 Colombian Tax Reform, Colombian losses can be carryforward for a period of 12 years, and not indefinitely as under the previous tax regime. There is a grandfathering rule for losses incurred prior to 2017, which may continue to be carried forward indefinitely. $75.4 million of the Colombian losses can be carried forward indefinitely and $83.8 million are entitled to a carryforward period of 12 years.

As at December 31, 2019 and 2018, Gran Tierra had no unrecognized tax benefits and related interest and penalties included in its deferred and current tax liabilities in the consolidated balance sheet. The Company does not anticipate any material changes with respect to unrecognized tax benefit within the next twelve months. The Company had no other significant interest or penalties related to taxes included in the consolidated statement of operations for the quarter ended December 31, 2019. The Company and its subsidiaries file income tax returns in the U.S. and certain other foreign jurisdictions. The Company is subject to income tax examinations for the tax years ended 2011 through 2019 in certain jurisdictions.

In the fourth quarter of 2019, $1.4 million of value added tax receivable was written-off mainly as a result of internal restructuring of our Colombian entities in order to drive efficiency and reduce costs.