FLEX LTD.FLEX
FLEX LTD. Income Taxes Disclosure
INCOME TAXES
The domestic (Singapore) and foreign components of income from continuing operations before income taxes were comprised of the following:
| Fiscal Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Domestic | $ | (459) | $ | 94 | $ | (165) | |||||||||||
| Foreign | 1,602 | 929 | 831 | ||||||||||||||
| Total | $ | 1,143 | $ | 1,023 | $ | 666 | |||||||||||
The (benefit from) provision for income taxes from continuing operations consisted of the following:
| Fiscal Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Domestic | $ | 2 | $ | 2 | $ | 3 | |||||||||||
| Foreign | 223 | 128 | 161 | ||||||||||||||
| 225 | 130 | 164 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Domestic | — | 3 | (1) | ||||||||||||||
| Foreign | 38 | 52 | (369) | ||||||||||||||
| 38 | 55 | (370) | |||||||||||||||
| (Benefit from) provision for income taxes | $ | 263 | $ | 185 | $ | (206) | |||||||||||
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in note 2 "Summary of Significant Accounting Policies," the reconciliation of taxes at the Singapore statutory rate of 17.0% to the Company's provision for (benefit from) income taxes for the year ended March 31, 2026 was as follows (in millions, except percentages):
| Fiscal Year Ended March 31, 2026 | |||||||||||
| Amounts | Percent | ||||||||||
| Income taxes based on domestic statutory rates | $ | 194 | 17 | % | |||||||
| Effect of jurisdictional tax rate differential: | |||||||||||
| China: | |||||||||||
| Liability for Undistributed Earnings | 10 | 1 | % | ||||||||
| Other | 12 | 1 | % | ||||||||
| Brazil: | |||||||||||
| Statutory tax rate difference between Brazil and Singapore | 15 | 1 | % | ||||||||
| Nontaxable or nondeductible items | (78) | (7) | % | ||||||||
| Foreign exchange gain or loss on deferred tax asset | (42) | (4) | % | ||||||||
| Change in valuation allowance | 93 | 8 | % | ||||||||
| Other | (12) | (1) | % | ||||||||
| Hungary: | |||||||||||
| Local business Tax | 11 | 1 | % | ||||||||
| Other | (7) | (1) | % | ||||||||
| Luxembourg: | |||||||||||
| Statutory tax rate difference between Luxembourg and Singapore | 22 | 2 | % | ||||||||
| Change in valuation allowance | (70) | (6) | % | ||||||||
| Other | (6) | — | % | ||||||||
| Netherlands: | |||||||||||
| Nontaxable or nondeductible items | (17) | (1) | % | ||||||||
| Other | 7 | 1 | % | ||||||||
| Malaysia: | |||||||||||
| Statutory tax rate difference between Malaysia and Singapore | 12 | 1 | % | ||||||||
| Other | (5) | — | % | ||||||||
| Mexico: | |||||||||||
| Statutory tax rate difference between Mexico and Singapore | 47 | 4 | % | ||||||||
| Nontaxable or nondeductible items | (45) | (4) | % | ||||||||
| Other | (8) | (1) | % | ||||||||
| United States: | |||||||||||
| Statutory tax rate difference between United States and Singapore | 23 | 2 | % | ||||||||
| State and local income tax | 10 | 1 | % | ||||||||
| Global intangible low-taxed income | 17 | 2 | % | ||||||||
| Excess compensation (Section 162(m)) | 21 | 2 | % | ||||||||
| Stock-based compensation | (30) | (3) | % | ||||||||
| Other | 1 | — | % | ||||||||
| Other Foreign Jurisdictions: | |||||||||||
| Nontaxable or nondeductible items | (9) | (1) | % | ||||||||
| Other | 2 | — | % | ||||||||
| Nontaxable or nondeductible items | 61 | 5 | % | ||||||||
| Change in unrecognized tax benefits | 33 | 3 | % | ||||||||
| Other | 1 | — | % | ||||||||
| Provision for income taxes | $ | 263 | 23 | % | |||||||
The reconciliation of taxes at the federal statutory rate to the Company's provision for (benefit from) income taxes for the years ended March 31, 2025 and 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| Fiscal Year Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In millions) | |||||||||||
| Income taxes based on domestic statutory rates | $ | 174 | $ | 113 | |||||||
| Effect of jurisdictional tax rate differential | 13 | 68 | |||||||||
| Change in unrecognized tax benefit | (19) | (10) | |||||||||
| Change in valuation allowance | (37) | (685) | |||||||||
| Foreign exchange movement on prior year taxes recoverable | 4 | (1) | |||||||||
| Liability for undistributed earnings | 6 | 135 | |||||||||
| Global intangible low-taxed income (GILTI) / Subpart F income | 9 | 13 | |||||||||
| Nextracker related transactions gains | — | 115 | |||||||||
| Earnings from partnership | — | 47 | |||||||||
| U.S. state taxes | 10 | 10 | |||||||||
| Excess compensation (Section 162(m)) | 16 | 15 | |||||||||
| Other | 9 | (26) | |||||||||
| (Benefit from) provision for income taxes | $ | 185 | $ | (206) | |||||||
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, cash paid for income taxes, net of refunds, during the fiscal year ended March 31, 2026 was as follows:
| Fiscal Year Ended March 31, 2026 | ||||||||
| (In millions) | ||||||||
| Domestic | $ | — | ||||||
| Foreign: | ||||||||
| Mexico | 84 | |||||||
| China | 82 | |||||||
| Malaysia | 41 | |||||||
| Mauritius | 20 | |||||||
| United States | 18 | |||||||
| Other countries | 78 | |||||||
| Total cash paid for income taxes, net of refunds | $ | 323 | ||||||
Cash paid for income taxes, net of refunds, during the fiscal years ended March 31, 2025 and 2024 was $184 million and $243 million, respectively.
A number of countries in which the Company is located allow for tax holidays or provide other tax incentives to attract and retain business. In general, these holidays were secured based on the nature, size and location of the Company’s operations. The aggregate dollar effect on the Company’s income resulting from tax holidays and tax incentives to attract and retain business for the fiscal years ended March 31, 2026, 2025 and 2024 were $19 million, $17 million and $20 million, respectively. For the fiscal year ended March 31, 2026, the effect on basic and diluted earnings per share was $0.05, and the effects on basic and diluted earnings per share during fiscal years 2025 and 2024 were $0.04, and $0.05, respectively. Unless extended or otherwise renegotiated, the Company's existing holidays will expire in various years through the end of fiscal year 2031.
The Company provides a valuation allowance against deferred tax assets that in the Company's estimation are not more likely than not to be realized. During fiscal years 2026, 2025 and 2024, the Company released net valuation allowances totaling
$1 million, $4 million and $447 million, respectively. The $1 million net release during fiscal year 2026 was related to operations in various jurisdictions.
In addition, various other valuation allowance positions in other jurisdictions were increased or decreased to offset movement in deferred tax positions due to varying factors such as one-time income recognition in loss entities with existing valuation allowances, liquidation of entities with existing valuation allowances, recognition of uncertain tax positions impacting deferred tax assets with existing valuation allowances, foreign exchange impacts on deferred tax balances with existing valuation allowances, and current period losses in legal entities with existing valuation allowance positions. These offsetting changes in the valuation allowance included an increase of $17 million in the fiscal year ended March 31, 2026, a decrease of $53 million in the fiscal year ended March 31, 2025, and an increase of $43 million in the fiscal year ended March 31, 2024.
Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to Singapore. The Company has included the effects of Singapore's territorial tax system in the rate differential line above. The tax effects of foreign income not repatriated to Singapore for the fiscal years ended March 31, 2026, 2025 and 2024 were $49 million, $96 million and zero, respectively.
The components of deferred income taxes are as follows:
| As of March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In millions) | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets | $ | (39) | $ | (44) | |||||||
| Intangible assets | (45) | (52) | |||||||||
| Others | (92) | (128) | |||||||||
| Total deferred tax liabilities | (176) | (224) | |||||||||
| Deferred tax assets: | |||||||||||
| Fixed assets | 76 | 76 | |||||||||
| Intangible assets | 1 | 3 | |||||||||
| Deferred compensation | 44 | 37 | |||||||||
| Inventory valuation | 29 | 32 | |||||||||
| Provision for doubtful accounts | 2 | 3 | |||||||||
| Net operating loss and other carryforwards | 943 | 1,022 | |||||||||
| Tax receivable agreement | 70 | 74 | |||||||||
| Others | 235 | 186 | |||||||||
| Total deferred tax assets | 1,400 | 1,433 | |||||||||
| Valuation allowances | (797) | (781) | |||||||||
| Total deferred tax assets, net of valuation allowances | 603 | 652 | |||||||||
| Net deferred tax asset | $ | 427 | $ | 428 | |||||||
| The net deferred tax asset is classified as follows: | |||||||||||
| Long-term asset | $ | 538 | $ | 577 | |||||||
| Long-term liability | (111) | (149) | |||||||||
| Total | $ | 427 | $ | 428 | |||||||
Utilization of the Company's deferred tax assets is limited by the future earnings of the Company in the tax jurisdictions in which such deferred assets arose. As a result, management is uncertain as to when or whether these operations will generate sufficient profit to realize any benefit from the deferred tax assets. The valuation allowance provides a reserve against deferred tax assets that are not more likely than not to be realized by the Company. However, management has determined that it is more likely than not that the Company will realize certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The change in valuation allowance is net of certain increases and decreases to prior year losses and other carryforwards that have no current impact on the tax provision.
The Company has recorded deferred tax assets of approximately $1.0 billion related to tax losses and other carryforwards against which the Company has recorded a valuation allowance for all but $224 million of the deferred tax assets. These tax losses and other carryforwards will expire at various dates as follows:
| Expiration dates of deferred tax assets related to operating losses and other carryforwards | ||||||||
| Fiscal year | (In millions) | |||||||
| 2027 - 2032 | $ | 89 | ||||||
| 2033 - 2038 | 171 | |||||||
| 2039 and thereafter | 9 | |||||||
| Indefinite | 704 | |||||||
| $ | 973 | |||||||
The amount of deferred tax assets considered realizable, however, could be reduced or increased in the near-term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries, differ from management’s estimates.
The Company does not provide for income taxes on approximately $930 million of undistributed earnings of its subsidiaries which are considered to be indefinitely reinvested outside of Singapore as management has plans for the use of such earnings to fund certain activities outside of Singapore. The estimated amount of the unrecognized deferred tax liability on these undistributed earnings is approximately $82 million. In the current year, the Company, as part of its regular process, assessed its cash position in overseas territories relative to the levels needed to manage operations and fund future investment in those territories. Management noted that the current and forecasted cash position in China was in excess of levels required to fund the Company’s business in the country. As a result, a deferred tax liability of $82 million was recorded on the remaining distributable earnings from China of approximately $822 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Fiscal Year Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In millions) | |||||||||||
| Balance, beginning of fiscal year | $ | 180 | $ | 197 | |||||||
| Additions based on tax position related to the current year | 13 | 10 | |||||||||
| Additions for tax positions of prior years | 29 | 1 | |||||||||
| Reductions for tax positions of prior years | (5) | (5) | |||||||||
| Reductions related to lapse of applicable statute of limitations | (13) | (23) | |||||||||
| Settlements | (52) | — | |||||||||
| Impact from foreign exchange rates fluctuation | 7 | — | |||||||||
| Balance, end of fiscal year | $ | 159 | $ | 180 | |||||||
The Company’s unrecognized tax benefits are subject to change over the next twelve months primarily as a result of the expiration of certain statutes of limitations and as audits are settled. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an additional approximate $10 million within the next twelve months primarily due to potential settlements of various audits and the expiration of certain statutes of limitations.
The Company and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2008.
Of the $159 million of unrecognized tax benefits at March 31, 2026, $131 million will affect the annual effective tax rate ("ETR") if the benefits are eventually recognized. The amount that does not impact the ETR relates to positions that would be settled with a tax loss carryforward previously subject to a valuation allowance.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the Company’s tax expense. The Company recognized interest and penalties of approximately zero, ($3) million and ($2) million, during the fiscal years ended March 31, 2026, 2025, and 2024, respectively. The Company had approximately $10 million, $10 million and $13
million accrued for the payment of interest and penalties as of the fiscal years ended March 31, 2026, 2025, and 2024, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 20, 2026 | Showing above |
| 2025 | May 21, 2025 | |
| 2024 | May 17, 2024 | |
| 2023 | May 19, 2023 | |
| 2022 | May 20, 2022 | |
| 2021 | May 19, 2021 | |
| 2020 | May 28, 2020 | |
| 2019 | May 21, 2019 | |
| 2018 | Jun 14, 2018 | |
| 2017 | May 16, 2017 | |
| 2016 | May 20, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.