Note 18 - Income Taxes

Income before income taxes is earned in the following tax jurisdictions:

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Income tax expense (recovery) is incurred in the following jurisdictions:

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Current income tax expense for 2026 in Canada is comprised of federal and provincial current income tax expense of $19,860 and $523, respectively.

Deferred income tax (recovery) for 2026 in Canada is comprised of federal and provincial deferred income tax (recovery) of ($2,679) and ($161), respectively.

On July 4, 2025, the government of the United States of America enacted the One Big Beautiful Bill Act of 2025 (“OBBBA”) which includes, among other provisions, changes to the US corporate income tax system including the restoration of immediate expensing of qualifying domestic research and development (“R&D”) costs and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. The changes in respect of the deductibility of current year US domestic R&D costs and 100% deduction of the remaining unamortized basis of previously capitalized domestic R&D costs have decreased current tax expense and increased deferred tax expense by $14.3 million in 2026. These changes had no material impact on the relationship between income tax expense (benefit) and income (loss) before income taxes.

Income tax expense for 2026, 2025 and 2024 was 25%, 25% and 23% of income before income taxes, respectively, with current income tax expense being 19%, 28% and 27% of income before income taxes, respectively.

Current income tax expense decreased in 2026 as compared to 2025 primarily due to the availability of tax attributes in the United States in 2026.

Current income tax expense increased in 2025 as compared to 2024 primarily due to a decrease in tax attributes available to shelter income in Canada and the United Kingdom.

Deferred income tax expense increased in 2026 as compared to 2025 primarily due to an increase in the utilization of available tax attributes in the United States resulting from the OBBBA.

Deferred income tax recovery decreased in 2025 as compared to 2024 primarily due to the utilization of tax attributes in the United States partially offset by full utilization of tax attributes in the United Kingdom and Canada in the prior period.

The components of the deferred income tax assets and liabilities are as follows:

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As at January 31, 2026, we have not accrued for foreign withholding taxes and Canadian income taxes applicable to approximately $1,383.7 million of unremitted earnings of subsidiaries operating outside of Canada. These earnings, which we consider to be invested indefinitely, will become subject to these taxes if and when they are remitted as dividends or if we sell our stock in the subsidiaries. If we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside Canada.

The provision (recovery) for income taxes varies from the expected provision at the statutory rates for the reasons detailed in the table below:

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Ontario is the only jurisdiction that makes up more than 50% of domestic provincial income taxes, net of federal effect (net of provincial abatement).

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We have income tax loss carry forwards which expire as follows:

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The following is a tabular reconciliation of the total estimated liability associated with uncertain tax positions taken:

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We have identified accruals of $6.0 million with respect to uncertain tax positions as at January 31, 2026. It is possible that these accruals for uncertain tax positions will not be required in which case up to $6.0 million of the recorded liability will decrease the effective tax rate in future years if this liability is reversed.

We recognize accrued interest and penalties related to uncertain tax positions as a current tax expense. As at January 31, 2026 and January 31, 2025, the unrecognized tax positions have resulted in no material liability for estimated interest and penalties.

Descartes and our subsidiaries file their tax returns as prescribed by the tax laws of the jurisdictions within which they operate. We are no longer subject to income tax examinations by tax authorities in our major tax jurisdictions as follows:

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The following table provides the income taxes paid (net of refunds):

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Income taxes paid during 2025 and 2024 as reported on the consolidated statements of cash flows are not net of refunds.

Income taxes paid (net of refunds) exceeded 5% of total income taxes paid (net of refunds) in the following jurisdictions:

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Jurisdictions below the 5% threshold have been excluded from the table above.