Income Taxes |
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| Income Taxes | 9)Income Taxes Components of Current and Deferred Tax Expense All of the income from continuing operations before income taxes was taxable in Norway for the three and six months ended June 30, 2025 and 2024. Our Norwegian subsidiaries are subject to Norwegian tonnage tax rather than ordinary corporate taxation. Under the tonnage tax regime, tax is payable based on the tonnage of the vessel, not on operating income, and is included within operating expenses. Net financial income and expense remain taxable as ordinary income at the regular corporate income tax rate of 22% and is recorded as an income tax expense. The amount of tonnage tax included in operating expenses for each of the three and six months ended June 30, 2025 was 63,501 and 120,327, respectively. The amount of tonnage tax included in operating expenses for each of the three and six months ended June 30, 2024 was $54,660 and $108,500, respectively. The activities taxable in the UK relate to the activities of KNOT Offshore Partners UK LLC (“KNOT UK”) and are included within income taxes payable. Taxes payable related to the entrance tax, a one-time tax payable by the Partnership related to certain subsidiaries on entering the Norwegian tonnage tax system, and income taxes attributable to income from continuing operations are calculated based on the Norwegian corporate tax rate of 22% for 2025 and 2024, and deferred tax liabilities are also calculated based on a tax rate of 22% effective as from January 1, 2025 and January 1, 2024, respectively. As of June 30, 2025 and December 31, 2024, 3.1 million and $3.3 million are presented as non-current deferred taxes assets, respectively, and as of June 30, 2025 and December 31, 2024, 0.1 million and $0.1 million are presented as non-current deferred taxes liabilities, respectively. Significant components of current and deferred income tax expense attributable to income from continuing operations for the three and six months ended June 30, 2025 and 2024 were as follows:
Income tax expenses for the three and six months ended June 30, 2025 and 2024 consist of the following:
The Partnership records a valuation allowance against deferred tax assets when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. In assessing the need for a valuation allowance against deferred tax assets, which relate to financial loss carry forwards and other deferred tax assets within the tonnage tax regime, the Partnership considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized taking into account all the positive and negative evidence available. The Partnership has determined that part of the deferred tax assets are likely to not be realized, and therefore a valuation allowance is recognized as of June 30, 2025, and December 31, 2024. KNOT Shuttle Tankers AS has taxable income, and the Partnership has determined it is more likely than not that some of the benefit from the deferred tax assets would be realized based on the weight of available evidence. As of June 30, 2025 and December 31, 2024, the Partnership has determined that 3.0 million and 3.2 million of the deferred tax assets, respectively, are more likely than not to be realized. |
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