v3.25.2
Income taxes
 12 Months Ended
Jun. 27, 2025
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Fabrinet’s effective tax rate is a function of the mix of tax rates in the various jurisdictions in which we conduct business. Fabrinet is domiciled in the Cayman Islands. Under the current laws of the Cayman Islands, Fabrinet is not subject to tax in the Cayman Islands on income or capital gains until March 6, 2039.
The majority of the Company’s operations and production take place in Thailand. The Company was not subject to tax in Thailand from July 2012 through June 2020 on income generated from the manufacture of products at its Pinehurst campus Building 6, and is not subject to tax in Thailand from July 2018 through June 2026 on income generated from the manufacture of products at its Chonburi campus. Between June 2020 and June 2025, 50% of the Company's income generated from products manufactured at its Pinehurst campus Building 6 was exempted from tax in Thailand. Preferential tax treatment is available to the Company for products manufactured at its Chonburi campus Building 9, where income generated will be tax exempt through 2031, capped at the Company’s actual investment amount. Such preferential tax treatment is contingent on various factors, including the export of our customers’ products out of Thailand and our agreement not to move our manufacturing facilities out of our current province in Thailand for at least 15 years from the date on which preferential tax treatment was granted. Currently, the corporate income tax rate for our Thai subsidiary is 20%.
The corporate income tax rates for our subsidiaries in the PRC, the U.S., the U.K. and Israel are 25%, 21%, 25% and 23%, respectively. Our provision for income taxes is computed using the asset and liability method, under which deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at currently enacted statutory tax rates for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment.
The Company’s income tax expense consisted of the following:
Years Ended
(in thousands)June 27,
2025		June 28,
2024		June 30,
2023
Current$27,812 $11,993 $15,044 
Deferred(5,159)3,180 (2,861)
Total income tax expense$22,653 $15,173 $12,183 
The reconciliation between the Company’s taxes that would arise by applying the statutory tax rate of the country of the Company’s principal operations, Thailand, to the Company’s effective tax charge is shown below:
Years Ended
(in thousands)June 27,
2025		June 28,
2024		June 30,
2023
Income before income taxes (1)
$355,180 $311,354 $260,096 
Tax expense calculated at a statutory corporate income tax rate of 20%
71,036 62,271 52,019 
Effect of income taxes from locations with tax rates different from Thailand
(1,197)(945)659 
Income not subject to tax (2)
(62,032)(62,940)(43,685)
Income tax on unremitted earnings1,521 1,488 2,452 
Non-deductible expenses9,045 10,347 39 
Foreign operations2,426 (600)1,792 
Tax rebate from research and development application(211)17 (124)
Provision for uncertain income tax position678 1,131 (7)
Utilization of loss and tax credits carryforward— — (80)
Changes in valuation allowance (3)
— 3,759 (1,608)
Others1,387 645 726 
Corporate income tax expense$22,653 $15,173 $12,183 
(1)Income before income taxes from domestic operations in the Cayman Islands amounted to $263.0 million, $306.0 million and $196.5 million for the years ended June 27, 2025, June 28, 2024 and June 30, 2023, respectively.
(2)Income not subject to tax relates to income earned in the Cayman and Mauritius Islands and income subject to an investment promotion privilege in Thailand. Income not subject to tax per ordinary share on a diluted basis was $1.71, $1.72, and $1.19 for the years ended June 27, 2025, June 28, 2024, and June 30, 2023, respectively.
(3)Changes in valuation allowances were due to adjustments based on management's assessment on the realizability of the related deferred tax assets.
The Company’s deferred tax assets and deferred tax liabilities, net of valuation allowance, at each balance sheet date are as follows:
As of
(in thousands)June 27,
2025		June 28,
2024
Deferred tax assets:
Depreciation$2,368 $1,890 
Severance liability5,981 4,496 
Reserves and allowance5,554 3,735 
Net operating loss carryforwards2,532 3,146 
Others452 792 
Total16,887 14,059 
Less: Valuation allowance(3,481)(3,613)
Net deferred tax assets$13,406 $10,446 
Deferred tax liabilities:
Temporary differences from intangibles and changes in the fair value of assets acquired$(1,543)$(1,626)
Deferred tax from unremitted earnings(2,141)(5,303)
Others2,089 2,034 
Total(1,595)(4,895)
Net$11,811 $5,551 
The changes in the valuation allowances of deferred tax assets were as follows:
(in thousands)Valuation allowances of
deferred tax assets
Balance as of June 24, 2022$4,934 
Additional498 
Reduction(1,608)
Balance as of June 30, 20233,824 
Additional3,613 
Reduction(3,824)
Balance as of June 28, 20243,613 
Additional823 
Reduction(955)
Balance as of June 27, 2025$3,481 
During fiscal year 2020, one of our subsidiaries in the U.K. also generated net operating loss and management expected that such subsidiary would continue to have net operating losses in the foreseeable future. Therefore, management believed it was more likely than not that all of the deferred tax assets of such subsidiary would not be utilized. Thus, a full valuation allowance of $1.6 million for the deferred tax assets was set up as of the end of fiscal year 2020. A full valuation allowance of $3.8 million, $4.9 million and $2.1 million were set up for the fiscal year ended June 30, 2023, June 24, 2022 and June 25, 2021, respectively. During fiscal year 2024, deferred tax assets and valuation allowance were released due to our cessation of operations in the U.K.
During fiscal year 2023, the other subsidiary in the U.K. generated taxable income and was able to utilize loss carryforwards. Management determined that it was more likely than not that future taxable income would be sufficient to
allow utilization of the deferred tax assets. Thus, a full valuation allowance of $1.6 million for the deferred tax assets was released as of June 30, 2023. In fiscal year 2024, due to the planned closure of this entity, management believed that such subsidiary would not generate sufficient taxable income to utilize the remaining deferred tax assets. Thus, a full valuation allowance of $1.0 million was recorded. In fiscal year 2025, the remaining deferred tax assets and valuation allowance were written off after the application to dissolve the entity was filed in the U.K.
During fiscal year 2024, our subsidiary in Israel continued to generate net operating loss and management expected that such subsidiary would continue to have net operating losses in the foreseeable future; therefore, management believed it was more likely than not that all of the deferred tax assets of such subsidiary would not be utilized. Thus, a full valuation allowance of $2.7 million for the deferred tax assets was set up as of the end of fiscal year 2024. Full valuation allowance continued to be recorded in fiscal year 2025.
Income tax liabilities have not been established for withholding tax and other taxes that would be payable on the unremitted earnings in Thailand, which are permanently reinvested. Unremitted earnings in Thailand totaled $167.9 million and $144.4 million as of June 27, 2025 and June 28, 2024, respectively. Unrecognized deferred tax liabilities for such unremitted earnings were $16.9 million and $11.6 million as of June 27, 2025 and June 28, 2024, respectively.
Deferred tax liabilities of $1.5 million have been established for withholding tax on the unremitted earnings in China for the years ended June 27, 2025 and June 28, 2024, which are included in non-current deferred tax liability in the consolidated balance sheets.
Uncertain income tax positions
Interest and penalties related to uncertain income tax positions are recognized in income tax expense. The Company had approximately $0.1 million of accrued interest and penalties related to uncertain income tax positions on the consolidated balance sheets as of June 27, 2025. The Company recorded interest and penalties of $0.2 million and $0.1 million for the years ended June 28, 2024 and June 30, 2023, respectively, in the consolidated statements of operations and comprehensive income. The amount of interest and penalties reversed in fiscal 2025 provision for income taxes is de minimis. With regard to the Thailand jurisdiction, tax years 2019 through 2023 remain open to examination by the local authorities.
The changes to the Company’s uncertain income tax positions for the years ended June 27, 2025, June 28, 2024 and June 30, 2023, excluding interest and penalties, were as follows:
Years Ended
(in thousands)June 27,
2025		June 28,
2024		June 30,
2023
Beginning balance$1,249 $1,288 $1,392 
Additions during the year620 1,091 15 
Release of tax positions of prior years(23)(1,130)(119)
Ending balance$1,846 $1,249 $1,288