TAXES ON INCOME:

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

TAXES ON INCOME:

NOTE 11 - TAXES ON INCOME:

a. Tax laws applicable to the Company and its subsidiaries

Taxation in the United States

InspireMD, Inc. is taxed under U.S. tax laws. Accordingly, the applicable federal corporate tax rate in 2023 is 21%. the applicable state income tax rate in 2023 is 3.42%.

Taxation in Israel

InspiredMD, Ltd is taxed under Israeli tax laws. Accordingly, the applicable corporate tax rate in 2023 is 23%.

Taxation in Germany

InspireMD GmbH is taxed according to the tax laws in Germany. Accordingly, the applicable tax rates are corporate tax rate of 15.825% and trade tax rate of 17.15%.

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 - TAXES ON INCOME: (continued):

b. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Law”):

On December 29, 2016, the Investment Law was amended (“73 Amendment”), which includes, inter alia, two new tax incentive opportunities. These are the Preferred Technological Enterprise (“PTE”) and Special Preferred Technological Enterprise (“SPTE”). In order to benefit from either of these options, a Company must meet certain qualifications and receive formal approval from the Israel Innovation Authority (“IIA”) which allows the Company to use the reduced corporate tax rate of 12% on its “Preferred Technological Income” (earned from enterprises located in Development outside of Zone A) in the case of a “preferred technology enterprise”, or 6% on its “preferred technology income” (earned from enterprises located in Development Zone A or outside it) in the case of a “special preferred technology enterprise”. Additionally, any “technology income”, as this term is defined by the Law, not classified as “preferred technology income” is subject to the corporate tax rate.

Furthermore, according to the provisions regarding “preferred technology enterprise” and “special preferred technology enterprise” in the Law and the regulations thereunder, and to the extent the income is attributable to manufacturing, this income is classified as “preferred income” and is taxed at 7.5% or 16% according to the development zone. To the extent the income is from an intangible asset used for marketing, it is subject to the normal corporate tax rate.

Additionally, when income of a company originating from “preferred technology income” is distributed as dividend to a foreign-resident corporation, tax withholding from the dividend is 4%, provided that 90% or more of that company’s shares are directly held by one or more foreign corporations, and the profits resulted after they acquired the shares.

c. Carry forward tax losses

As of December 31, 2023, the Company had a net carry forward tax loss of approximately $54 million, of which approximately $35 million (arising before January 1, 2018), expires until 2038, and approximately $19 million, which does not expire, but is limited to offset 80% of the net income in the year it is utilized.

Under the U.S. tax laws, for net operating losses (NOLs) arising after December 31, 2017, the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “2017 Act”) limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income.

In addition, NOLs arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018, will not be subject to the foregoing taxable income limitation and will continue to have a two-year carryback and twenty-year carryforward period.

As of December 31, 2023, InspireMD Ltd., an Israeli subsidiary, had a net carry forward tax loss of approximately $107 million. Under Israeli tax laws, the carry forward tax losses can be utilized indefinitely.

The Israeli subsidiary is taxed in the New Israeli Shekel (“NIS”), which is different from its functional currency (U.S. Dollar). The change in the Israeli subsidiary NOL’s for tax purposes is partly resulted by such rate differences.

d. Loss before income taxes

The components of loss before income taxes are as follows:

	Year ended December 31
	2023			2022
	($ in thousands)
Loss before taxes on income:
InspireMD, Inc.	$	(5,772	)	$	(4,773	)
Subsidiaries		(14,079	)		(13,690	)
	$	(19,851	)	$	(18,463	)

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 - TAXES ON INCOME (continued):

e. Current taxes on income

The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the change in valuation allowance in respect of tax benefits from carried forward tax losses due to uncertainty of the realization of such tax benefits.

The changes in the valuation allowance for the year ended December 31, 2023 and 2022 were as follows:

	Year ended December 31
	2023		2022
	($ in thousands)
Balance at the beginning of the year	$	40,071	$	39,212
Changes during the year:
Losses during the year (including foreign exchange rate effect)		2,580		859
Balance at the end of the year	$	42,651	$	40,071

f. Accounting for Uncertain Tax position

The following is a reconciliation of the total amounts of the Company’s uncertain tax positions during the year ended December 31, 2023 and 2022 were as follows:

	Year ended December 31,
	2023		2022
	($ in thousands)
Balance at beginning of period	$	106	$	89
Increase in uncertain tax positions because of tax positions taken during the year		62		17
Balance at end of period	$	168	$	106

A summary of open tax years by major jurisdiction is presented below:

Jurisdiction	Years
U.S.	2020-2023
Israel	2019-2023
Germany	2020-2023

g. Deferred income tax:

	December 31,
	2023			2022
	($ in thousands)
Provision for vacation and recreation pay		68			45
R&D expenses		1,691			1,452
Operating lease right of use assets		(339	)		(357	)
Operating lease liabilities		367			371
Share-based compensation		3,492			3,021
Carry forward tax losses		37,342			35,507
Accrued severance pay, net		30			32
		42,651			40,071
Less-valuation allowance		(42,651	)		(40,071	)
		-			-

INSPIREMD, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)