15. INCOME TAXES

The Company files tax returns in United States (“U.S.”) Federal, state and local jurisdictions, plus Argentina and the United Kingdom (“U.K.”).

United States and international components of income before income taxes were as follows:

 SCHEDULE OF LOSS BEFORE INCOME TAX, DOMESTIC AND FOREIGN

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The income tax provision (benefit) consisted of the following:

 SCHEDULE OF COMPONENTS OF INCOME TAX PROVISION (BENEFIT)

For the years ended December 31, 2023 and 2022, the expected tax expense (benefit) based on the statutory rate is reconciled with the actual tax expense (benefit) as follows:

 SCHEDULE OF EFFECTIVE RECONCILIATION OF INCOME TAX PROVISION (BENEFIT)

As of December 31, 2023 and 2022, the Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following:

 SCHEDULE OF DEFERRED TAX ASSETS

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the Company has approximately $86,744,000 of gross U.S. federal net operating losses (“NOLs”). Approximately $50,519,000 of the federal NOLs will expire from 2023 to 2037 and approximately $36,225,000 have no expiration date. These NOL carryovers are subject to annual limitations under Section 382 of the U.S. Internal Revenue Code because there was a greater than 50% ownership change, as determined under the regulations, on or about June 30, 2012. We have determined that, due to those annual limitations under Section 382, an additional $6,300,000 of NOLs will expire unused and are not included in the available NOLs stated above. Therefore, we have reduced the related deferred tax asset for NOL carryovers by approximately $2,810,000 from June 30, 2012 forward. The Company’s NOLs generated through the date of the ownership change on June 30, 2012 are subject to an annual limitation of approximately $1,000,000. The Company remains subject to the possibility that a greater than 50% ownership change could trigger additional annual limitations on the usage of NOLs. As of December 31, 2022, the Company had approximately $85,374,000 of gross U.S. federal net operating losses (“NOLs”), which included approximately $4,100,000 of GGI NOLs.

As of December 31, 2023, the Company has Florida, New York State and New York City NOLs of approximately $15,816,000, $53,689,000 and $30,130,000, respectively. These NOLs include approximately $0 of GGI NOLs. As of December 31, 2022, the Company had gross Florida, New York State and New York City NOLs of approximately $9,049,000, $56,193,000 and $32,597,000, respectively. The Florida NOLs will expire from 2041 – 2043. All of the New York State and New York City NOLs will expire from 2035 to 2038. During the year ended December 31, 2021, the Company re-established nexus in New York State and New York City as the Company has employees located there. The previously written off NOL’s and related deferred tax assets (that have been reduced by a valuation allowance of a corresponding amount) have been reinstated.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the future generation of taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and taxing strategies in making this assessment. Based on this assessment, management has established a full valuation allowance against all of the net deferred tax assets for each period, since it is more likely than not that all of the deferred tax assets will not be realized. The valuation allowance for the year ended December 31, 2023 and 2022 (decreased) increased by approximately ($403,500) and $4,200,000, respectively.

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2023 and 2022. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. The Company has U.S. tax returns subject to examination by tax authorities beginning with those filed for the year ended December 31, 2019 (or the year ended December 31, 2023 if the Company were to utilize its NOLs). No tax audits were commenced or were in process during the years ended December 31, 2023 and 2022. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements of operations.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS