Income tax expense

12 Months Ended

Dec. 31, 2020

Income tax expense

Income tax expense

13.  Income tax expense

Income (loss) before income taxes attributable to domestic and international operations, consists of the following:

	Year ended December 31
(in thousands)	2018		2019		2020
Domestic	$	(113,699)	$	(78,761)	$	(71,344)
Foreign		(1,032)		(3,902)		1,999
Loss before income taxes	$	(114,731)	$	(82,663)	$	(69,345)

Income tax expense consists of the following:

	Year ended December 31
(in thousands)	2018		2019		2020
Current tax
Domestic	$	—	$	—	$	—
Foreign		(49)		(101)		(139)
Deferred tax
Domestic		—		—		—
Foreign		—		—		—
Total income tax expense	$	(49)	$	(101)	$	(139)

The reconciliation to our effective tax rate from the Irish statutory income tax rate of 12.5% for the years ended December 31, 2018, 2019 and 2020 is as follows:

	Year ended December 31
(% of pre-tax income)	2018		2019		2020
Statutory income tax rate	12.5	%	12.5	%	12.5	%
Non-deductible expenses	(0.1)		(0.1)		—
Income not subject to tax	0.3		0.3		0.2
Tax credits	0.1		0.4		0.6
Foreign rate differential	(3.1)		0.6		3.0
In-process research and development	(3.5)		—		—
Tax audit assessments	—		(11.8)		—
Other	0.2		0.8		2.3
Valuation allowance	(6.5)		(2.8)		(18.8)
Effective income tax rate	(0.1)	%	(0.1)	%	(0.2)	%

The following table summarizes the components of deferred income tax balances:

	As of December 31,
(in thousands)	2019		2020
Deferred tax assets:
Net operating loss carryforwards	$	94,014	$	108,095
Tax loss on liquidation of subsidiary		5,024		4,029
Equity compensation		4,182		4,449
Non-deductible reserves		395		447
Total deferred tax assets		103,615		117,020
Valuation allowance		(103,185)		(116,200)
Net deferred tax assets		430		820
Deferred tax liabilities:
Financial liabilities		48		757
Property, plant and equipment		382		63
Total deferred tax liability		430		820
Deferred tax, net	$	—	$	—

The table below summarizes changes in the deferred tax valuation allowance:

	Year ended December 31,
(in thousands)	2018		2019		2020
Balance at beginning of year	$	(80,087)	$	(100,832)	$	(103,185)
Tax benefit		(7,301)		(2,353)		(13,015)
Acquired tax attributes		(13,444)		—		—
Balance at end of year	$	(100,832)	$	(103,185)	$	(116,200)

The following table summarizes carryforwards of net operating losses as of December 31, 2020.

(in thousands)	Amount		Expiration
Ireland	$	251,775	Indefinite
Austria	$	248,563	Indefinite
United States	$	10,401	Indefinite
United States	$	35,516	2033

Due to uncertainty regarding the ability to realize the benefit of deferred tax assets primarily relating to net operating loss carryforwards and the fact that the Company is in a three year pretax cumulative loss position, a full valuation allowance has been established.

On the basis of this evaluation, as of December 31, 2018, 2019 and 2020, the Company has recorded a valuation allowance of $100.8 million, $103.2 million and $116.2 million, respectively, to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

At December 31, 2020, the Company had no uncertain tax positions and did not expect any material increase or decrease in income tax expense related to examinations or changes in uncertain tax positions. At December 31, 2019, the Company received a tax assessment from the government in Austria resulting in a change of deferred tax assets. The assessment does not result in a cash settlement. The Company’s U.S. subsidiary, Nabriva Therapeutics US, Inc., is currently under examination for tax year 2018 with the Internal Revenue Service.

The Company files income tax returns in Ireland. In addition, the Company’s foreign subsidiaries file separate income tax returns in Austria and the United States and state jurisdictions in which they are located. Tax years 2017 and

forward remain open for examination for Ireland tax purposes and 2016 and forward remain open for examination for Austrian tax purposes and years 2016 and forward remain open for examination for United States tax purposes.

The Company’s policy is to record interest and penalties related to tax matters in income tax expense.