Income Taxes

12 Months Ended

Dec. 31, 2025

Note 8. Income Taxes

Income before income taxes consisted of the following:


Year ended December 31,	2025		2024		2023
Domestic (Canada)	$	191.9	$	252.9	$	170.0
Foreign	343.7		297.2		112.4
Income before income taxes	$	535.6	$	550.1	$	282.4

The components of income tax expense are as follows:


Year ended December 31,	2025		2024		2023



Domestic (Canada):
Current tax expense	$	40.2	$	74.3	$	43.4
Deferred tax benefit	(0.2)		(5.7)		(2.7)

Foreign:


Current tax expense	122.0		132.2		98.8

Deferred tax benefit	(54.0)		(63.5)		(63.1)
Income tax expense	$	108.0	$	137.3	$	76.4

The provision for income taxes was different from the Canadian federal statutory rate applied to income before taxes and is reconciled as follows (percentages of income before income taxes):


Year ended December 31,	2025				2024				2023
Canadian federal statutory tax rate1	$	133.9	25.0	%	$	137.5	25.0	%	$	70.6	25.0	%
Provincial tax, net of federal income tax effect2	0.5		0.1	%	1.1		0.2	%	0.6		0.2	%
Foreign tax effects:
United States
Statutory tax rate difference between United States and Canada	(13.7)		(2.6)	%	(11.0)		(2.0)	%	(4.0)		(1.4)	%
Benefit of Foreign Derived Intangible Income	(10.3)		(1.9)	%	(3.3)		(0.6)	%	(6.9)		(2.4)	%
Executive compensation and fringe benefits	1.5		0.3	%	3.1		0.6	%	4.3		1.5	%
Nontaxable or nondeductible items	1.3		0.2	%	1.8		0.3	%	4.8		1.7	%
State and local income taxes	1.9		0.4	%	3.5		0.6	%	3.0		1.1	%
Other	(6.8)		(1.3)	%	(4.9)		(0.9)	%	(0.3)		(0.1)	%
United Kingdom	9.9		1.8	%	—		—	%	—		—	%
Other foreign countries	1.0		0.2	%	0.7		0.1	%	(0.5)		(0.2)	%
Tax credits	(1.0)		(0.2)	%	(2.0)		(0.4)	%	—		—	%
Nontaxable or nondeductible items	(3.2)		(0.6)	%	0.7		0.1	%	1.5		0.5	%
Changes in unrecognized tax benefits	(3.4)		(0.6)	%	5.5		1.0	%	2.0		0.7	%
Change in Valuation Allowance	—		—	%	(1.2)		(0.2)	%	0.1		—	%
Other adjustments	(3.5)		(0.7)	%	5.8		1.0	%	1.3		0.4	%
Effective tax rate	$	108.0	20.2	%	$	137.3	25.0	%	$	76.4	27.1	%

1 The Canadian federal statutory tax rate reflects the basic corporate rate of 38%, less the 13% general rate reduction applicable to public companies.

2 Provincial taxes in British Columbia, Alberta, and Ontario for 2023 to 2025 made up the majority of the tax effect in this category.

The Company has determined that the undistributed earnings generated by its foreign subsidiaries along with any additional outside basis differences were indefinitely reinvested as of December 31, 2025, therefore no deferred tax was provided. The Company believes it is not practicable to estimate the amount of deferred tax liability related to the entire outside basis differences due to the complexity of the calculation and the uncertainty regarding assumptions necessary to compute the tax. However, the Company would not anticipate any significant tax liability associated with the repatriation of the undistributed earnings.

The following table presents income taxes paid, net of refunds received, by jurisdiction:


Year ended December 31,	2025		2024		2023
Federal (Canada)	$	51.8	$	29.0	$	45.9
Provincial and local (Canada):
British Columbia	23.9		10.5		16.4
Other provincial and local	16.3		11.6		18.8
Foreign:
United States federal	101.0		116.2		77.1
Other foreign	34.0		33.7		21.8
Income taxes paid, net of refunds received	$	227.0	$	201.0	$	180.0

The Company offsets all deferred tax assets and liabilities by tax filing jurisdiction, as well as any related valuation allowance, and presents them as a single non-current deferred income tax asset or non-current deferred income tax liability. Deferred tax assets and deferred tax liabilities were as follows:


	December 31, 2025		December 31, 2024
Deferred tax assets:
Working capital	$	24.6	$	25.1
Property, plant and equipment	10.2		4.9
Share-based compensation	22.5		14.4
Tax losses and tax credit carryforwards	29.2		39.1
Lease liabilities	392.4		381.8
Notes receivable/payable	5.1		8.8
Other	3.6		17.2
Total deferred tax assets	$	487.6	$	491.3

Deferred tax liabilities:
Property, plant and equipment	$	(97.0)	$	(74.7)
Goodwill	(22.4)		(23.6)
Intangible assets	(513.0)		(586.6)
Right-of-use assets	(374.7)		(376.2)

Notes receivable/payable	(10.6)		(17.7)
Other	(5.5)		(5.6)
Total deferred tax liabilities	(1,023.2)		(1,084.4)

Net deferred tax liabilities	(535.6)		(593.1)

Valuation allowances	(15.1)		(6.8)
Net deferred tax	$	(550.7)	$	(599.9)

At December 31, 2025, the Company had non-capital loss carryforwards that are available to reduce taxable income in the future years. These non-capital loss carryforwards expire as follows:


2026	$	—
2027	0.3
2028	—
2029	—
2030 and thereafter	80.9
	$	81.2

The Company has capital loss carryforwards of approximately $68.1 million (2024: $67.1 million) available to reduce future capital gains and interest deduction carryforwards of $0.8 million (2024: $63.5 million), both of which carryforward indefinitely.

Tax losses are denominated in the currency of the countries in which the respective subsidiaries are located and operate. Fluctuations in currency exchange rates could reduce the U.S. dollar equivalent value of these tax loss and tax credit carry forwards in future years.

The following table summarizes the activity related to unrecognized tax benefits:


	December 31, 2025		December 31, 2024
Unrecognized tax benefits, beginning of year	$	26.7	$	25.1
Increases related to acquisition-related tax positions	—		0.3
Increases related to prior year tax positions	1.2		5.1
Decreases related to prior year tax positions	(2.7)		—
Increases related to current year tax positions	2.3		3.1
Settlement and lapse of statute of limitations	(6.4)		(5.7)
Effect of foreign currency translation	0.7		(1.2)
Unrecognized tax benefits, end of year	$	21.8	$	26.7

At December 31, 2025, the Company had gross unrecognized tax benefits of $21.8 million (2024: $26.7 million), of which $16.2 million (2024: $18.7 million) represents the net amount of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate.

The Company records interest and penalties related to unrecognized tax benefits within the Company's provision for income taxes. At December 31, 2025, the Company had accrued $4.2 million (2024: $4.4 million) for interest and penalties that have been included in the above reconciliation table, and during the year ended December 31, 2025 the Company recognized a recovery of $0.2 million (2024: $0.1 million) for interest and penalties.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the United States Tax Cuts and Jobs Act and amends other provisions of the Internal Revenue Code. The legislation has multiple effective dates, with certain provisions effective in 2025 and others through 2027. The OBBBA did not have a material impact on the Company’s consolidated financial statements.

The Company is routinely subject to tax audits and reviews in various jurisdictions around the world. Tax authorities may challenge the manner in which the Company has filed its tax returns and reported its income.

On December 3, 2024, the Canada Revenue Agency (“CRA”) issued the Company a Notice of Assessment and Statement of Interest for C$79.1 million ($57.8 million), for the taxation years 2010 through 2015, inclusive of C$37.7 million ($27.5 million) in income taxes, and C$41.4 million ($30.2 million) in interest and penalties. The CRA is asserting that one of the Company’s Luxembourg subsidiaries, which was in operation from 2010 to 2020, was a resident in Canada from 2010 through 2015 and that its worldwide income should be subject to Canadian income taxation.

In February 2025, the Company filed a Notice of Objection with the CRA as it believes it is and has been in full compliance with Canadian tax laws and it intends to pursue all available administrative and judicial remedies necessary to resolve this matter. In addition, the Company paid a deposit of C$39.5 million ($28.8 million) to the CRA in early February 2025, recorded within other non-current assets, the minimum required by law as part of the CRA’s objection process. In the event that the Company prevails in its objection or subsequent legal proceedings, the deposit would be refunded with interest to the Company. In June 2025, the Company filed a Notice of Appeal with the Tax Court of Canada. In October 2025, the Canadian Crown filed a response to the Company’s Notice of Appeal with the Tax Court of Canada maintaining the CRA’s assertion and requesting that the Company’s appeal be dismissed. The Company believes the Crown’s response is without merit and plans to continue to litigate.

In the event that the Company’s tax filing position is not upheld by either the CRA or by a court of last resort, the Company would incur and record the amounts assessed in income tax, interest and penalties in its consolidated financial statements, which could have a material negative effect on the Company’s results of operations.

In addition, in late 2024, the CRA requested information regarding the 2016 to 2020 taxation years for the same matter, which the Company provided in January 2025. In September 2025, the CRA requested additional information and clarification regarding previous submissions to which the Company responded and provided the additional information in October 2025. The Company has not received a notice of assessment relating to the 2016 to 2020 taxation years. Depending on the outcome of this matter, the Company could incur additional income taxes, penalties and interest relating to the 2016 to 2020 taxation years, which could have a material negative effect on its results of operations.

At December 31, 2025 and December 31, 2024, the Company has not recorded any amounts relating to this matter in the consolidated financial statements, as it is the Company’s conclusion that it is more likely than not that the Company’s tax filing position will ultimately be sustained. The Company is unable to predict the ultimate outcome of this matter and the final disposition of any appeals, which could take numerous years to resolve.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

RB GLOBAL INC. 10-K