Income taxes

12 Months Ended

Dec. 31, 2025

13	Income taxes

Taxes on earnings reflect the annual effective rates, including charges for interest and penalties. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts.

The components of loss before income taxes for 2025 and 2024 consist of:


	2025	2024
	$	$
Domestic - Canada	(43,370)	(28,286)
Foreign	1,052	468
	(42,318)	(27,818)

The components of (provision for) benefit from income taxes for 2025 and 2024 consist of:


	2025	2024
	$	$
Current
Foreign	231	144
Total current income tax expense	231	144
Deferred
Foreign	21	(146)
Total deferred tax expense	21	(146)
Total income tax (recovery) expense	252	(2)

The income taxes paid by the Company are as follows:


	2025	2024
	$	$
United States	68	193
Finland	64	59
	132	252

The (provision for) benefit from income taxes differs from the expected amount calculated by applying the Company’s Canadian federal statutory rate to loss before income taxes for 2025 and 2024 as follows:


	2025			2024
	$		%	$		%
Loss before income taxes	(42,318)		—	(27,818)		—
(Provision for) benefit from income taxes
Canadian federal statutory rate of 15% (2024 - 15%)	(6,348)		15.0	(4,173)		15.0
Ontario Provincial tax	(4,655)		11.0	(2,998)		10.8
Foreign tax effects
United States
Statutory tax rate differences between United States and Canada	60		(0.1)	16		—
Finland
Statutory tax rate differences between Finland and Canada	2		—	10		—
Germany
Statutory tax rate differences between Germany and Canada	18		—	(42)		0.1
Changes in valuation allowance	9,802		(23.2)	7,085		(25.5)
Non-taxable or non-deductible items	1,097		(2.6)	206		(0.7)
Other adjustments	276		(0.7)	(106)		0.3
Effective tax rate	252		(0.6)	(2)		—

The components of deferred tax assets and liabilities are summarized as follows:


	2025		2024
	$		$
Deferred tax assets:
Operating loss carry forwards	52,152		43,031
SR&ED expenditure pool	4,454		4,344
Benefit of Investment tax credits	2,151		2,078
Excess of tax value of property and equipment over book value	2,390		2,392
Long term debt	5		(32)
Financing fees	1,331		1,042
Reserves	980		827
Total deferred tax assets	63,463		53,682
Valuation allowance	(63,397)		(53,595)
Net deferred tax assets	66		87

Deferred income taxes reflect future tax effects of temporary differences between the tax and financial reporting basis of the Company’s assets and liabilities measured using enacted tax laws and statutory tax rates applicable to the periods when the temporary differences will affect taxable income. When necessary, deferred tax assets are reduced by a valuation allowance, if based on the weight of available positive and negative evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized. The Company has $63,397 in valuation allowance against its deferred tax assets, for the year ended December 31, 2025 (2024 - $53,595).

The Company has non-capital loss carry-forwards in Canada of approximately $204,045 which expires as follows:


		$
2028		128
2029		215
2030		51
2031		446
Thereafter		203,205
Total		204,045

The Company has SR&ED expenditures in Canada of approximately $17,472 as at December 31, 2025, which can be carried forward indefinitely to reduce future years’ taxable income.

The Company has approximately $3,838 of Canadian federal and provincial tax credits that are available to be applied against Canadian federal and provincial taxes otherwise payable in future years and that expire in varying amounts from 2028 to 2045.

- Definition

The entire disclosure for income tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Profound Medical Corp. 10-K