Indian IT giant Infosys Limited has announced the successful conclusion of an advance pricing agreement (APA) with the US Internal Revenue Service (IRS), a move that will enhance predictability of the company’s tax obligations in respect of its US operations.
Under the APA, Infosys and the IRS have agreed on the methodology to allocate revenues and compute the taxable income of the company’s US operations, covering financial years 2011 through 2021.
In accordance with the APA, Infosys expects to reverse tax provisions of approximately USD 225m made in previous periods. Further, the company expects to pay out approximately USD 233m due to the difference between the taxes payable for prior periods as per the APA and the actual taxes paid for such periods.
Additionally, the company expects its overall effective tax rate to be lower by about 100 basis points for future periods covered under the APA.
The preliminary discussions with the IRS on the APA were initiated by the Company in 2015, followed by multiple rounds of discussions.