| INCOME TAXES |
NOTE
7 - INCOME TAXES:
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1. |
Tax
rates applicable to the income of the Israeli subsidiary: |
Odysight.ai
is taxed according to Israeli tax laws.
The
Israeli corporate tax rate from the year 2018 and onwards is 23%.
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2. |
Tax
rates applicable to the income of the U.S. company: |
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The
Company is taxed according to U.S. tax laws. |
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The
U.S. corporate tax rate from the year 2018 and onwards is 21%. |
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b. |
Deferred
income taxes: |
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Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets
are as follows: |
SCHEDULE OF COMPONENT OF DEFERRED TAX ASSET
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2023 | | |
2022 | |
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December
31, | |
| | |
2023 | | |
2022 | |
| | |
USD
in thousands | |
| Operating
loss carryforward | |
| 25,006 | | |
| 19,239 | |
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| Net deferred tax asset before valuation allowance | |
| 5,786 | | |
| 4,564 | |
| Valuation allowance | |
| (5,786 | ) | |
| (4,564 | ) |
| Net deferred tax | |
| - | | |
| - | |
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As
of December 31, 2023, the Company has provided a full valuation allowance of $5,786 thousand in respect of deferred tax assets resulting
from tax loss carryforwards and other temporary differences. Management currently believes that because the Company has a history
of losses, it is more likely than not that the deferred tax regarding the loss carryforward and other temporary differences will
not be realized in the foreseeable future. |
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c. |
Available
carryforward tax losses: |
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As
of December 31, 2023, the Company has an accumulated tax loss carryforward of approximately $25,006 thousand. Carryforward tax losses
in Israel are of unlimited duration. Under the Tax Cut and Jobs Act of 2017, or the Tax Act (subject to modifications under the Coronavirus
Aid, Relief, and Economic Security Act), federal net operating losses (NOL) incurred in taxable years ending after December 31, 2017
and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It
is uncertain if and to what extent various states will conform to the newly enacted federal tax law. |
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In
addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation
undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change, by value, in
its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other
pre-change tax attributes to offset its post-change income or taxes may be limited. Such limitations may result in the expiration
of net operating losses before utilization. |
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d. |
The
main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance
in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization
of such deferred taxes. |
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e. |
As
of December 31, 2021, Odysight.ai owed NIS 740 thousand, (approximately $229 thousand) in additional taxes to the Israel Tax Authority
following a VAT audit in Israel for 2019-2021. |
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On
November 18, 2021, Odysight.ai filed an appeal to the Israeli Tax Authority on the finding of the VAT audit. |
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Due
to the uncertainty regarding the outcome of the appeal, the financial statements as of December 31, 2021 included a provision related
to the additional taxes of $229 thousand, which was included in general and administrative expenses in the statement of operation
report. |
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In
July 2022, Odysight.ai reached an agreement with the Israeli Tax Authority, according to which the amount due in additional taxes
was reduced to NIS 340 thousand (approximately $100 thousand). |
ODYSIGHT.AI
INC. (Formerly known as ScoutCam Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|