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Income taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Net income (loss) before tax is summarized below ($ in thousands):
 Year Ended December 31,
 202220212020
Domestic$1,896 $1,517 $1,053 
Foreign49,257 (98,602)(274,396)
Net income (loss) before tax$51,153 $(97,085)$(273,343)
The components of our income tax benefit for the years ended December 31, 2022, 2021 and 2020 were as follows ($ in thousands):
 Year Ended December 31,
 202220212020
Current   
Domestic$— $— $431 
Foreign(1,243)(2,706)(892)
Total current income tax provision(1,243)(2,706)(461)
Deferred
Domestic5,333 — (7,684)
Foreign1,463 10,109 19,118 
Total deferred income tax benefit6,796 10,109 11,434 
Income tax benefit$5,553 $7,403 $10,973 
Reconciliation of the Netherlands statutory income tax rate to actual income tax rate
A reconciliation of the Netherlands statutory income tax rate to our effective income tax rate from continuing operations is as follows ($ in thousands):
 Year Ended December 31,
202220212020
Income tax (provision) benefit at statutory rate$(13,197)25.8 %$24,272 25.0 %$68,336 25.0 %
Differences between statutory rate and foreign rates31,490 (61.6)%16,741 17.2 %(598)(0.2)%
Inflation adjustments10,106 (19.8)%7,312 7.5 %4,366 1.6 %
Nondeductible interest and expenses(5,202)10.2 %(12,969)(13.4)%(19,893)(7.3)%
Goodwill impairment— — %— — %(4,900)(1.8)%
Foreign exchange rate differences(3,570)7.0 %(7,950)(8.2)%(4,194)(1.5)%
Dominican Republic tax classification— — %— — %7,949 2.9 %
Dutch and U.S. tax rate change— — %2,753 2.8 %10,545 3.9 %
Basis difference in fixed assets— — %— — %(3,026)(1.1)%
Change in valuation allowance(13,941)27.3 %(20,820)(21.4)%(48,213)(17.6)%
Other(133)0.3 %(1,936)(2.0)%601 0.1 %
Income tax benefit$5,553 (10.8)%$7,403 7.5 %$10,973 4.0 %
We are domiciled in the Netherlands and are taxed in the Netherlands with our other Dutch subsidiaries. Dutch companies are subject to Dutch corporate income tax at a general tax rate of 25.8%.
For the year ended December 31, 2022, we recognized an income tax benefit of $5.6 million, resulting in an effective tax rate for the year of (10.8)%. The 2022 income tax benefit was driven primarily by a $10.1 million tax benefit associated with inflation adjustments related to our Dominican Republic and Mexico operations and a $31.5 million tax benefit from our rate-favorable jurisdictions. The 2022 income tax benefit was partially offset by $13.2 million expense on the tax impact of book income, $5.2 million tax expense on non-deductible stock compensation and other expenses, $3.6 million tax expense due to changes in foreign exchange rates, and a $13.9 million increase in our valuation allowance primarily due to current year losses that are not more likely than not realizable.
For the year ended December 31, 2021, we recognized an income tax benefit of $7.4 million, resulting in an effective tax rate for the year of 7.5%. The 2021 income tax benefit was driven primarily by a $24.3 million benefit on the tax impact of book losses, a $7.3 million tax benefit associated with inflation adjustments, a $16.7 million tax benefit from our rate-favorable jurisdictions, and a $2.8 million tax benefit on measurement of deferred tax assets and liabilities pursuant to statutory tax rate changes. The 2021 income tax benefit was partially offset by $13.0 million of tax expense on non-deductible stock compensation and other expenses, an $8.0 million tax expense due to changes in foreign exchange rates, a $20.8 million increase in our valuation allowance,1 and a $1.9 million tax expense on other miscellaneous items.
For the year ended December 31, 2020, we recognized an income tax benefit of $11.0 million, resulting in an effective tax rate for the year of 4.0%. The 2020 income tax benefit was driven primarily by a $68.3 million benefit on the tax impact of book losses, a $4.4 million tax benefit associated with inflation adjustments, a $10.5 million tax benefit on measurement of the Dutch deferred tax assets and liabilities pursuant to the Dutch tax rate change, and a $7.9 million tax benefit associated with our Dominican Republic entities. The 2020 income tax benefit was partially offset by $24.8 million of tax expense on non-deductible interest, goodwill and other expenses, a $4.2 million tax expense due to changes in foreign exchange rates, a $3.0 million tax expense associated with a newly established basis difference in fixed assets and a $48.2 million increase in our valuation allowance.
We have a taxable presence in a variety of jurisdictions worldwide, most significantly in Mexico, the Netherlands, the U.S., the Dominican Republic and Jamaica. We have been granted certain “tax holidays,” providing us with temporary income tax exemptions. Specifically, two of our entities in the Dominican Republic are under a tax holiday. Playa Romana Mar B.V. and Playa Dominican Resorts B.V. began a 15 year tax exemption period in 2019.
Effects of Tax Legislative Changes
We were not significantly impacted by income tax legislative changes enacted in any jurisdictions for the year ended December 31, 2022.

In April 2021, the Mexico Congress approved amendments to the Mexico Labor Law. The tax provisions of the amendments were effective August 1, 2021. The measures we adopted in response to the amendments to the Mexico Labor Law did not have any net income tax impact.

On December 21, 2021, the Dutch Senate approved the 2022 tax package. Effective January 1, 2022, the corporate income tax rate for 2022 and future tax years increased to 25.8% for amounts in excess of €0.4 million. The adjusted rate increased the carrying value of our deferred tax assets that are offset by a full valuation allowance. Our Netherlands deferred tax assets increased $2.7 million and valuation allowance increased $2.7 million and resulted in no net financial statement impact.

On December 15, 2020, the Dutch Senate approved the 2021 tax package. Effective January 1, 2021 the corporate income tax rate for 2021 increased to 25% for amounts in excess of €0.2 million. The adjusted rate increased the carrying value of our deferred tax assets that are offset by a full valuation allowance. Our Netherlands deferred tax assets increased $10.5 million and valuation allowance increased $10.5 million and resulted in no net financial statement impact.
Dominican Republic

Our Dominican Republic entities are potentially subject to income tax and asset tax. We account for the Dominican Republic hybrid tax expense in accordance with ASC 740, Income Taxes. Our Dominican Republic taxes for the years ended December 31, 2021 and December 31, 2020 were determined based upon Advanced Pricing Agreements (“APA”) approved by the Ministry of Finance of the Dominican Republic. We have not received any APAs for the year ended December 31, 2022.

During 2022, our Dominican Republic entities were subject to income tax and asset tax. For the year ended December 31, 2022, we recorded current tax expense of $0.3 million and deferred tax benefit of $0.5 million.

During 2021, our Dominican Republic entities were not subject to income tax. For the year ended December 31, 2021, we recorded a deferred tax benefit of $1.9 million.

During 2020, our Dominican Republic entities were not subject to income tax. We projected that they would be subject to income taxes in some of the foreseeable years and computed a hybrid tax rate for our deferred taxes. For the year ended December 31, 2020, we recorded deferred tax benefit of $7.9 million.
Deferred income taxes
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as net operating losses and tax credit carry-forwards. We measure those balances using the enacted tax rates we expect will be in effect when we pay or recover taxes. Deferred income tax assets represent amounts available to reduce income taxes we will pay on taxable income in future years. We evaluate our ability to realize these future tax deductions and credits by assessing whether we expect to have sufficient future taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies to utilize these future deductions and credits. We establish a valuation allowance when we no longer consider it more likely than not that a deferred tax asset will be realized.
The tax effect of each type of temporary difference and carry-forward that gives rise to a significant portion of our deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows ($ in thousands):
As of December 31,
20222021
Deferred tax assets
Advance customer deposits$2,263 $2,242 
Trade payables and other accruals11,022 9,441 
Labor liability accrual1,190 895 
Lease obligation981 584 
Interest expense48,995 31,895 
Other assets3,106 —
Net operating losses143,959 143,098 
Total deferred tax asset211,516 188,155 
Valuation allowance(177,817)(160,104)
Net deferred tax asset33,699 28,051 
Deferred tax liabilities
Accounts receivable and prepayments to vendors582 164 
Property and equipment93,449 93,503 
Other liabilities1,572 3,282 
Total deferred tax liability95,603 96,949 
Net deferred tax liability$(61,904)$(68,898)
As of December 31, 2022, we had approximately $520.6 million of foreign net operating loss carryforwards and $22.4 million of U.S. federal and state net operating loss carryforwards. The ability to utilize the tax net operating losses in any single year ultimately depends upon our ability to generate sufficient taxable income. The foreign net operating loss carryforwards begin to expire in 2024, and the U.S. federal net operating loss carryforwards begin to expire in 2035. An annual limitation may apply to the use of the U.S. operating loss carryforwards under the provisions of the Internal Revenue Code and similar state tax provisions that are applicable if the Company experiences an “ownership change.” We performed an analysis of the potential limitations on the utilization of net operating losses and determined that they are subject to limitations that would preclude the use of a portion of the net operating losses.
We have made no provision for foreign or domestic income taxes on the cumulative unremitted earnings of our subsidiaries. We intend to indefinitely reinvest all foreign earnings and have no intention to repatriate foreign earnings for the foreseeable future, except for repatriation of earnings that can be distributed without incurring significant tax expense.
The change in the valuation allowance established against our deferred tax assets for the years ended December 31, 2022, 2021 and 2020 is summarized in the following table ($ in thousands):
 
Balance at
January 1
Additions
Deductions
Balance at
December 31
December 31, 2022$(160,104)$(29,728)$12,015 $(177,817)
December 31, 2021$(123,967)$(41,450)$5,313 $(160,104)
December 31, 2020$(79,788)$(45,833)$1,654 $(123,967)
The valuation allowance for each period is used to reduce the deferred tax asset to a more likely than not realizable value. As of December 31, 2022, our valuation allowance relates primarily to net operating loss carryforwards which we do not expect to utilize, most notably in the Netherlands and certain legal entities in Mexico and Jamaica.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2022, in part because we have achieved three years of cumulative pretax income in the U.S. federal and state tax jurisdictions, as well as in certain foreign jurisdictions, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred tax assets of $8.4 million will be realized in future years and released the valuation allowance previously recorded against these deferred tax assets. The change in valuation allowance also includes a net $26.1 million increase in valuation allowance due to current year activity.
As of December 31, 2022, a valuation allowance has been maintained as a reserve on material net deferred tax assets, including loss carry forwards, where the future realization of these deferred tax assets is uncertain. If our operating results continue to improve and our projections show continued utilization of tax attributes, we may consider that as significant positive evidence and our future reassessment may result in the determination that all or a portion of the valuation allowance is no longer required. The exact timing and amount of the valuation allowance releases are ultimately contingent upon the level of profitability achieved in future periods.
We are subject to income taxes in a variety of global jurisdictions. We remain subject to U.S. federal and state examinations of our income tax returns for tax years 2017 to the present. We are also subject to income tax examinations in various foreign jurisdictions for tax years 2011 to the present. We consider the potential outcome of current and future examinations in our assessment of our uncertain tax positions. We had no uncertain tax positions as of December 31, 2022, 2021 and 2020.