Infosys has signed an Advance Pricing Agreement (APA) with the US Internal Revenue Service (IRS), reducing its tax burden in the US by one percentage point till 2021 and giving clarity on tax obligations in the country.
The Advanced Pricing Agreement (APA), now concluded following discussions initiated in 2015, is expected to result in reversal of tax provisions of about $225 million made in the previous periods and boost the company's
consolidated basic earnings per share by about $0.10 for quarter ended December 31, the Bengaluru-based company said in a statement.
APA is an agreement between a taxpayer and the tax authority defining an appropriate methodology for computing taxable income.
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. This agreement covers financial years from 2011 to 2021. The APA will enhance predictability of the company’s tax obligations in respect of its US operations, it said.
The agreement covers financial years from 2011 to 2021 and the company expects to payout about $233 million over the next few quarters due to difference between taxes payable as per APA and the actual amount paid in the prior periods.
"We are glad that the APA has been executed in one of our key markets. The APA provides greater predictability of our taxes and minimizes uncertainties," Infosys CFO MD Ranganath said.
The APA will enhance predictability of company’s tax obligations in respect to U.S. operations, Infosys added.