14. Income taxes
The loss from continuing operations before income taxes was as follows:
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
United States |
|
|
(9,725,535 |
) |
|
|
(13,453,184 |
) |
|
|
(24,056,882 |
) |
|
Canada and other |
|
|
(92,379,506 |
) |
|
|
(14,769,776 |
) |
|
|
(17,117,545 |
) |
|
Loss from continuing operations before income taxes |
|
|
(102,105,041 |
) |
|
|
(28,222,960 |
) |
|
|
(41,174,427 |
) |
The income tax expense was as follows:
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
Canada |
|
|
81,735 |
|
|
|
25,646 |
|
|
|
(3,786 |
) |
|
Income tax expense (recovery) |
|
|
81,735 |
|
|
|
25,646 |
|
|
|
(3,786 |
) |
Differences between the statutory income tax rates and the effective income tax rates applied to the loss before income taxes consisted of the following:
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
Loss before income taxes |
|
|
102,105,041 |
|
|
|
28,222,960 |
|
|
|
41,174,427 |
|
|
U.S. statutory tax rates |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
Expected income tax recovery |
|
|
(35,736,764 |
) |
|
|
(9,878,036 |
) |
|
|
(14,411,049 |
) |
|
Foreign tax rate differential |
|
|
8,260,310 |
|
|
|
1,275,190 |
|
|
|
1,117,683 |
|
|
Stock based compensation and other permanent differences |
|
|
(4,109,897 |
) |
|
|
8,923,484 |
|
|
|
— |
|
|
Net increase (decrease) in valuation allowance |
|
|
7,723,006 |
|
|
|
(294,992 |
) |
|
|
13,289,580 |
|
|
Revaluation of the prior year deferred tax asset (1) |
|
|
23,925,278 |
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
19,802 |
|
|
|
— |
|
|
|
— |
|
|
Provision (recovery) for income taxes |
|
|
81,735 |
|
|
|
25,646 |
|
|
|
(3,786 |
) |
(1) On December 22, 2017, the United States (US) enacted the “Tax Cuts and Jobs Act” which has been commonly referred to as US tax reform. A significant change under this reform is the reduction of the US Federal tax rate from 35.0% to 21.0%, effective January 1, 2018. The revaluation of the prior year deferred tax asset is due to this reduction in tax rate. The valuation allowance was also reduced by a corresponding amount which is included in the net increase in valuation allowance presented in the table.
Deferred tax assets and liabilities
The tax effects of temporary differences that give rise to significant components of the deferred income tax assets and deferred income tax liabilities are presented below:
|
|
|
December 31, |
|
|
December 31, |
|
||
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
$ |
|
|
$ |
|
||
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
|
44,206,717 |
|
|
|
52,281,595 |
|
|
Interest accretion |
|
|
(2,124,150 |
) |
|
|
— |
|
|
Stock options |
|
|
2,229,842 |
|
|
|
3,156,799 |
|
|
Depreciable and amortizable assets |
|
|
24,129,276 |
|
|
|
5,838,705 |
|
|
Foreign currency differences |
|
|
678,697 |
|
|
|
1,365,811 |
|
|
Other |
|
|
(2,149,168 |
) |
|
|
48,614 |
|
|
Total gross deferred income tax assets |
|
|
66,971,214 |
|
|
|
62,691,523 |
|
|
Less: valuation allowance |
|
|
(66,971,214 |
) |
|
|
(62,691,523 |
) |
|
Total deferred income tax assets |
|
|
— |
|
|
|
— |
|
As at December 31, 2017, and 2016, the valuation allowance was primarily due to a history of losses generated. The valuation allowance is reviewed periodically and if the assessment of the “more likely than not” criterion changes, the valuation allowance is adjusted accordingly. There may also be an inability to utilize a significant amount of accumulated net operating losses and federal and state tax credit carryforwards to the extent an ownership change occurs for tax purposes.
The decrease in the valuation allowance for the year-ended December 31, 2017 was primarily due to the revaluation of net deferred tax assets of the Company as a result of the 2017 US Tax Cuts & Jobs Act.
As of December 31, 2017, the Company had approximately $47.5 million and $150.5 million in net operating loss carryforwards relating to its Canadian and U.S. entities, respectively. The loss carryforwards expire at various dates through 2037. The deferred tax benefit of these loss carryforwards is ultimately subject to final determination by taxation authorities. The Company’s net operating losses in the U.S. may be subject to restrictions under IRC Sec. 382. The Company will conduct a Sec. 382 limitation study when there is a practical need.
For the periods ended December 31, 2017, 2016 and 2015, the Company has not recorded tax benefits from the exercise of stock options.
BioAmber Inc. and its subsidiaries file income tax returns and pay income taxes in jurisdictions where it believes it is subject to tax. In jurisdictions in which BioAmber Inc. and its subsidiaries do not believe they are subject to tax and therefore do not file income tax returns, the Company can provide no certainty that tax authorities in those jurisdictions will not subject one or more tax years (since inception of BioAmber Inc. or its subsidiaries) to examination. Further, while the statute of limitations in each jurisdiction where an income tax return has been filed generally limits the examination period, as a result of loss carryforwards, the limitation period for examination generally does not expire until several years after the loss carryforwards are utilized. Other than routine audits by tax authorities for tax credits and tax refunds that the Company claims, the Company is not aware of any other material income tax examination currently in progress by any taxing jurisdiction. The Company’s major tax jurisdictions are Canada and the U.S. with few exceptions, BioAmber Inc. and its subsidiaries are subject to Canadian and U.S. income tax examinations in respect of all taxation years of the Company since inception. Its Luxembourg subsidiary was liquidated in November 2016.
The following is a roll forward of the total amounts of unrecognized tax benefits:
|
|
|
December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
Unrecognized tax benefits—beginning of period |
|
|
3,490,663 |
|
|
|
3,490,663 |
|
|
|
4,039,663 |
|
|
Gross decreases—tax positions in prior periods |
|
|
(1,396,265 |
) |
|
|
— |
|
|
|
(549,000 |
) |
|
Unrecognized tax benefits—end of period |
|
|
2,094,398 |
|
|
|
3,490,663 |
|
|
|
3,490,663 |
|
As of December 31, 2017 and 2016, the balance of unrecognized tax benefits included no tax benefits that, if recognized, would affect the effective tax rate. The balance of unrecognized tax benefits as of December 31, 2017 and 2016, also included respectively $2,094,398 and $3,490,663 of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily prepaid tax expense and deferred taxes.
The Company’s unrecognized tax benefits exceed uncertain tax positions relating to transfer pricing exposures from allocation of income between jurisdictions. The Company believes that it is reasonably possible that no increase in unrecognized tax benefits related to transfer pricing exposure liabilities may be necessary within the coming year.