Provision for Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

PROVISION FOR INCOME TAXES

NOTE 10 — PROVISION FOR INCOME TAXES

A. Basis of Taxation   United States:   The U.S. corporate tax rate was 21% in 2018 and 35% in 2017.   On December 22, 2017, the U.S. Tax Cuts and Jobs Act, or the Act, was enacted, which significantly changed U.S. tax laws. The Act lowered the tax rate of the Company. The statutory federal income tax rate was reduced from 35% in 2017 to 21% in 2018.   Israel:   The Company’s Israeli subsidiaries are governed by the tax laws of the state of Israel which had a general tax rate of 23% in 2018 and 24% in 2017. The Company is entitled to various tax benefits in Israel by virtue of being granted the status of an “Approved Enterprise Industrial Company” as defined by the tax regulations. The benefits include, among other things, a reduced tax rate.   In December 2010, legislation amending the Law for Encouragement of Capital Investments of 1959, or the Investment Law, was adopted. This new legislation became effective as of January 1, 2011 and applies to preferred income produced or generated by a preferred company from the effective date. Under this legislation, a uniform corporate tax rate applies to all qualifying income of certain Industrial Companies, or Preferred Enterprise (as defined under the Investment Law), as opposed to the previous law’s incentives, which were limited to income from Approved Enterprises and Privileged Enterprises during their benefits period. Under the legislation, the uniform tax rates are as follows: 2011 and 2012 - 15% (10% in preferred area), 2013 and 2014 - 12.5% (7% in preferred area) and in 2015 - 12% (6% in preferred area).   Effective beginning in 2014, the regular Israeli tax rate was 26.5% for Regular Entities and 16% or 9% for  Preferred Enterprises (depending on the location of industry). Micronet is eligible for the tax rate for Preferred Enterprises. In 2018 and 2017, Micronet was taxed at the 16% rate.   In December 2016, the Israeli government published the Economic Efficiency Law (2016) (legislative amendments to accomplish budget goals for the years 2017 and 2018). According to such law, in 2017 the general tax rate was decreased by 1% and starting in 2018 was decreased by 2%; so that the tax rate was 24% in 2017 and was 23% in 2018 and onwards. In addition, the tax rate that applies to Preferred Enterprises in preferred areas was be decreased by 1.5% to 7.5% starting January 1, 2017.

B. Provision for Taxes

	Year ended December 31,
	2018			2017
Current:
Domestic	$	(7	)	$	(1	)
Foreign (Israel)		(62	)		22
		(69	)		21
Taxes related to prior years		(15	)		(31	)
Deferred:
Deferred taxes, net		(522	)		-
Total provision for income taxes	$	(606	)	$	(10	)

C. The reconciliation of income tax at the U.S. statutory rate to the Company’s effective tax rate as follows:

	2018			2017
U.S. federal statutory rate		21	%		35	%
Tax rate difference between U.S. and Israel		2	%		(11	)%
Effect of Israeli tax rate benefit		(7	)%		(8	)%
Effect of previous years		-	%		-	%
Change in valuation allowance		(9	)%		(9	)%
Others		(7	)%		(7	)%
Effective tax rate		0.0	%		0.0	%

D. Deferred Tax Assets and Liabilities

Deferred tax reflects the net tax effects of temporary differences between the carrying amounts of assets or liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2018 and 2017, the Company’s deferred taxes were in respect of the following:

	December 31,
	2018			2017
Net operating loss carry forward	$	1,509		$	1,814
Provisions for employee rights and other temporary differences		278			542
Deferred tax assets before valuation allowance		1,787			2,356
Valuation allowance		(1,787	)		(1,814	)
Deferred tax assets		-			542
Deferred tax liability		-			-
Deferred tax assets, net	$	-		$	542

E. Tax losses   As of December 31, 2018, the Company has a net operating loss carry forward of approximately $5,123, according to the tax report of 2017, which may be utilized to offset future taxable income for United States federal tax purposes. This net operating loss carry forward begins to expire in 2022.  Since it is more likely than not that the Company will not realize a benefit from this net operating loss carry forward, a 100% valuation allowance has been recorded to reduce the deferred tax asset to its net realizable value.

F. Tax Assessments   The Company received final tax assessments in the United States through tax year 2012, and with regard to the Israeli subsidiaries received final tax assessments up until tax year 2012.

G. Uncertain Tax Position   The Company did not record any liability for income taxes associated with unrecognized tax benefits during 2018 and 2017.