INCOME TAXES

12 Months Ended

Oct. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10 - INCOME TAXES

The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

The provision (benefit) for income taxes comprises:

	October 31,			October 31,
	2023			2022
Current federal expense	$	264,955		$	849,580
Current state income tax expense		5,789			159,900
Foreign tax (benefit)		(22,089	)		(4,340	)
Total current tax expense		248,655			1,005,140
Deferred federal expense (benefit)		14,941			(174,026	)
Deferred state expense		3,913			-
Deferred foreign tax expense		29,570			-
Deferred tax expense (benefit)		48,424			(174,026	)
Total Income Tax Expense	$	297,079		$	831,114

CODA OCTOPUS GROUP, INC.

Notes to the Consolidated Financial Statements

October 31, 2023 and 2022

The expense for income taxes differed from the U.S. statutory rate due to the following:

	October 31,			October 31,
	2023			2022
Statutory US tax rate		21.0	%		21.0	%
R&D Relief		(9.7	)%		(10.6	)%
Change in valuation allowance		(3.4	)%		3.7	%
Foreign tax benefit including GILTI, net		2.1	%		(0.9	)%
State Income Tax		(1.3	)%		3.0	%
Total		8.7	%		16.2	%

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 and liabilities are as follows:

	October 31,			October 31,
	2023			2022
Noncurrent deferred tax assets (liabilities)
Temporary differences
U.S. NOL carryforwards	$	-		$	-
Deferred Revenue		-			4,830
Restricted Stock Awards		263,218			272,841
Book/Tax Depreciation		(21,554	)		(17,861	)
Foreign fixed assets		(218,045	)		(84,381
Foreign capital loss carryforwards		11,182			-
Foreign NOL carryforwards		176,585			409,100
Total		211,386			584,529
Valuation allowance		-			(324,719	)
Total Deferred Asset	$	211,386		$	259,810

As of October 31, 2023, we had no remaining U.S. federal net operating loss (NOL) carryforwards.

The Company’s tax jurisdictions are USA, UK, Denmark, India, and Australia (our India and Australian operations are currently dormant). As a result, the Company’ foreign derived income is subject to GILTI tax in the United States. The Company has elected to treat GILTI inclusions as period costs.

The Company has filed tax returns for federal, state, and foreign jurisdictions. The Company’s evaluation of uncertain tax matters was performed for the tax years ended October 31, 2023, and October 31, 2022. The Company has elected to retain its existing accounting policy with respect to the treatment of interest and penalties attributable to income taxes and continues to reflect interest and penalties attributable to income taxes, to extent they arise, as a component of its income tax provision or benefit as well as its outstanding income tax assets and liabilities. The Company believes that its income tax positions and deductions would be sustained on an audit and does not anticipate any adjustments to result in a material change to its financial position.

The Company’s UK Operations, under the applicable UK tax rules, have certain carryforward trading losses (referred to in this Form 10-K disclosure as “NOL carryforwards”). Under the applicable UK tax rules, any trading tax losses incurred from 2017 up to and including the current fiscal year can be surrendered for UK group relief to offset or reduce current year profits and tax liability in any of the Company’s UK Operations. Any tax losses before 2017 in a UK subsidiary can only be used by the subsidiary to which it pertains. The benefit of these tax losses benefit are available indefinitely unless the nature of the business with the tax benefit changes substantially. Under UK tax rules, the UK entities are also eligible for research and development (R&D) Tax Credit. The UK Products Business in any one financial year performs significant R&D work due to the nature of its business (researching and developing products and solutions). In the 2023 FY, this subsidiary was eligible to deduct £174,771 (an equivalent of 158,883 USD) as R&D tax expenses from its taxable income, thus negating any tax liability of the UK Operations in the Current FY. Our UK Operations have the equivalent of $477,271 in NOL carryforwards, $397,874 of which can be used by the UK entity in which the trading loss was created and $79,397 can be used by any of the UK entities under Group Relief. This applies indefinitely unless the business activities undertaken change substantially.

A valuation allowance is required for deferred tax assets, if based on available evidence, it is more likely than not that all or some portion of the asset will not be realized due to the inability to generate sufficient taxable income in the future. The valuation allowance was zero and $324,719 as of October 31, 2023, and 2022, respectively. The deferred tax losses refer to timing of asset allowance in the UK. As we are generally able to offset most taxes with brought forward trading losses, R&D tax credit to offset profits expected to be ongoing and ability to utilize such reliefs within between entities then we do not foresee being able to utilize those deferred tax assets in the near future.

CODA OCTOPUS GROUP, INC.

Notes to the Consolidated Financial Statements

October 31, 2023 and 2022