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Infosys has concluded an Advance Pricing Agreement (APA) deal with the US Internal Revenue Service.
In accordance with the APA, Infosys expects to reverse tax provisions of about $225 million made in previous years which are no longer required under International Financial Reporting Standards as well as Indian Accounting Standards.
Further, in line with the APA, the company expects to pay out approximately $233 million due to the difference between the taxes payable for prior periods as per the APA and the actual taxes paid for such periods, the company said.
The agreement covers financial years from 2011 to 2021, and the amount is expected to be paid over the next few quarters, said company executives. The reversal of the tax provisions of approximately $225 million will have a positive impact on the consolidated basic Earnings Per Share for the quarter ended December 31, 2017, by approximately $0.10.
Further, on account of the APA methodology, Infosys expects its overall effective tax rate to be lower by about 100 basis points or 1 per cent for future periods covered under the APA. MD Ranganath, CFO, said the APA provides greater predictability of the company’s taxes and minimises uncertainties.
Preliminary discussions with the IRS on the APA were initiated by Infosys in 2015, according to company executives. The APA will enhance the predictability of the company’s tax obligations in respect of its US operations.
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