Income Tax

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Tax

Income Tax

The components of income tax expense for the three and nine months ended September 30, 2023 and 2022, respectively, consisted of the following:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Current tax provision	$	8,166	$	9,537	$	21,037	$	24,610
Deferred tax benefit	(13,024)		(489)		(16,491)		(1,699)
Income tax (benefit) expense	$	(4,858)	$	9,048	$	4,546	$	22,911

The Company conducts operations in Puerto Rico, the United States, and certain countries in Latin America. As a result, the income tax expense includes the effect of taxes paid to the government of Puerto Rico as well as foreign jurisdictions. The following table presents the components of income tax expense for the three and nine months ended September 30, 2023 and 2022, and its segregation based on location of operations:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Current tax provision
Puerto Rico	$	1,851	$	6,318	$	5,626	$	11,809
United States	80		44		138		107
Foreign countries	6,235		3,175		15,273		12,694
Total current tax provision	$	8,166	$	9,537	$	21,037	$	24,610
Deferred tax benefit
Puerto Rico	$	(11,169)	$	719	$	(11,593)	$	(321)
United States	34		54		38		9
Foreign countries	(1,889)		(1,262)		(4,936)		(1,387)
Total deferred tax benefit	$	(13,024)	$	(489)	$	(16,491)	$	(1,699)

Taxes payable to foreign countries by EVERTEC’s subsidiaries will be paid by such subsidiary and the corresponding liability and expense will be presented in EVERTEC’s consolidated financial statements.

As of September 30, 2023, the Company had $130.6 million of unremitted earnings from foreign subsidiaries, compared to $115.5 million as of December 31, 2022. The Company has not recognized a deferred tax liability on undistributed earnings for the Company’s foreign subsidiaries because these earnings are intended to be indefinitely reinvested.

As of September 30, 2023, the gross deferred tax asset amounted to $29.9 million and the gross deferred tax liability amounted to $20.0 million, compared to $17.9 million and $20.7 million, respectively, as of December 31, 2022. As of September 30, 2023, and December 31, 2022, there is a valuation allowance against the gross deferred tax asset of approximately $2.4 million and $1.6 million, respectively.

Income tax expense differs from the amount computed by applying the Puerto Rico statutory income tax rate to the income before income taxes as a result of the following:

	Nine months ended September 30,
(In thousands)	2023		2022
Computed income tax at statutory rates	$	27,231	$	87,402
Differences in tax rates due to multiple jurisdictions	3,034		2,612
Effect of income subject to tax-exemption grant	(24,697)		(26,262)
Effect of the gain on sale of a business	—		(39,645)
Unrecognized tax expense	103		(3,472)
Excess tax benefits on share-based compensation	11		169
Tax credits for research and development activities	(884)		—
Other, net	(252)		2,107
Income tax expense	$	4,546	$	22,911