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13. Income taxes
 3 Months Ended
May 31, 2025
Income Tax Disclosure [Abstract]  
13. Income taxes

13.      Income taxes

 

 For the three months ended May 31, 2025 and 2024, our provision for income taxes was an expense of $148,988 and $126,939, respectively. The effective tax rate for the three months ended May 31, 2025 and 2024 was 57% and 59%, respectively. The effective tax rate for the three months ended May 31, 2025 differed from the U.S. statutory federal income tax rate of 21% primarily due to permanent differences which includes GILTI, and foreign rate differentials. The effective tax rate for the three months ended May 31, 2024 differed from the U.S. statutory federal income tax rate of 21% primarily due to foreign rate differentials.

 

 The effective tax rate is impacted by several factors, including:

 

  1. National, Federal and State Tax Rates: The statutory federal income tax rate is 21% for the United States and 27% for South Africa, compared to the effective tax rates disclosed above.  
  2. Permanent Differences: Certain items that are recognized in financial statements but are not taxable or deductible in the current period, such as relevant permanent differences specifically not allowed or which is capital in nature relating to the specific segments tax laws, impact our effective tax rate.  
  3. Temporary Differences: Timing differences between the recognition of income and expenses for tax purposes versus financial reporting purposes also contribute to the effective tax rate. Examples include depreciation methods, deferred tax assets/liabilities.  
  4. Tax Credits: Tax credits which may reduce our overall tax liability for the period.  
  5. Changes in Tax Legislation: Any recent changes in tax laws that may have affected our calculations, including will be considered.  
  6. Valuation Allowances: We evaluated the need for a valuation allowance on deferred tax assets based on our assessment of future taxable income.  

 

 

This effective tax rate may differ from the statutory rate due to the aforementioned factors. We will continue to monitor our effective tax rate and make necessary adjustments as required by changes in our operations or tax legislation.

 

As a U.S.-registered company with interests in South African entities, we are also considering our obligations under the OECD's Pillar II framework, which seeks to ensure that multinational enterprises pay a minimum level of tax. This framework informs our tax strategy and the management of our global tax liabilities. The tax rate in the territory of South Africa is 27% at the moment which is more than the 21% threshold in the U.S.