Overall effective tax rate expected to be lowered by 100 bpsInfosys announced the successful conclusion of an Advance Pricing Agreement with the US Internal Revenue Services (IRS). Under the APA, the Company 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 the predictability of the Company's tax obligations in respect of its US operations.
In accordance with the APA, the Company expects to reverse tax provisions of approx. USD 225 million made in previous periods which are no longer required. Further, in line with the APA, the Company expects to payout approx. USD 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. This amount is expected to be paid over the next few quarters.
The reversal of the tax provisions of approx. USD 225 million will have a positive impact on the consolidated Basic EPS for the quarter ending 31 December 2017 by approx. USD 0.10. Further, on account of APA methodology, the Company expects its overall effective tax rate to be lowered by about 100 basis point for future periods covered under the APA.
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