Infosys Ltd on Tuesday said it has signed an agreement with the U.S. Internal Revenue Service (IRS), resulting in an effective tax rate of about 100 basis points lower going forward.
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.
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.
The APA will enhance predictability of company's tax obligations in respect to U.S. operations, Infosys added.
(Reporting by Vishal Sridhar in Bengaluru; Editing by Vyas Mohan)