Infosys to save Rs 1,434 cr by signing APA with US

Infosys to save Rs 1,434 cr by signing APA with US

India's second largest IT services firm Infosys will save Rs 1,434 crore ($225 million) as a result of signing an Advanced Pricing Agreement (APA) with US Internal Revenue Service (USIRS) for a period between 2011 and 2017.

The IT major had initiated the talks with the US tax regulator on the APA since 2015. This APA will result in the reversal of tax provisions from 2011 to December 31, 2017. The agreement is for a period of 10 years ending 2021, the company said in a statement on Tuesday.

An APA is an ahead-of-time agreement between a tax payer and a tax authority on an appropriate transfer pricing methodology (TPM) for a set of transactions over a fixed period of time, called Covered Transactions.

As a result of the APA methodology, the company expects its overall effective tax rate to be lower by around 1% (100 basis points) for future periods covered under the APA.

Further, in line with the APA, the Company expects to payout approximately $233 million (Rs 1,484.5 crore) due to the difference between the taxes payable for prior periods as per the APA and the actual taxes paid for such 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 minimises uncertainties," Infosys CFO MD Ranganath said.

The agreement comes at a time when the US Citizenship and Immigration Services (USCIS), backtracked from any tweaking  in H1-B rules. Any such rule would have drastically impacted Indian IT companies, including Infosys, due to over-dependence on H1-B workers as a cost cutting measure.

US market is the major revenue generator for Infosys as it accounts for more than 60% of its revenues, followed by Europe.

 

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