Genpact LTDG
Genpact LTD Income Taxes Disclosure
Income taxes
As described in Note 2, Summary of Significant Accounting Policies, the Company has elected to adopt the guidance in “ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures” (ASU 2023-09), prospectively. In accordance with the guidance, the Company's country of domicile reflected for the year ended December 31, 2025 is Bermuda. This is a change from the comparable periods ended December 31, 2023, and December 31, 2024, for which the United States is presented as the Company's de facto country of domicile. The Company's country of domicile for purposes of this guidance has changed in 2025 due to Bermuda's adoption of an income tax rate of 15% in 2025. Prior to January 2025, the Bermuda income tax rate was zero percent. This change is applied consistently throughout the income tax disclosures.
Income tax expense (benefit) for the years ended December 31, 2023, 2024 and 2025 is allocated as follows:
| Year ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Income from continuing operations | $ | (29,031) | $ | 163,150 | $ | 177,653 | |||||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Cash flow hedging derivatives | 1,397 | (6,663) | (13,006) | ||||||||||||||
| Retirement benefits | 705 | 2,320 | (5,736) | ||||||||||||||
The components of income before income tax expense (benefit) from continuing operations are as follows:
| Year ended December 31, | |||||||||||
| 2023 | 2024 | ||||||||||
| Domestic (U.S.) | $ | 216,718 | $ | 307,650 | |||||||
| Foreign (other than U.S.) | 385,506 | 369,170 | |||||||||
| Income before income tax expense (benefit) | $ | 602,224 | $ | 676,820 | |||||||
| Year ended December 31, | |||||
| 2025 | |||||
| Domestic (Bermuda) | $ | (38,206) | |||
| Foreign (other than Bermuda) | 768,353 | ||||
| Income before income tax expense (benefit) | $ | 730,147 | |||
22. Income taxes ( Continued)
Income tax expense (benefit) attributable to income from continuing operations consists of:
| Year ended December 31, | |||||||||||
| 2023 | 2024 | ||||||||||
| Current tax expense: | |||||||||||
| Domestic (U.S. federal) | $ | 20,222 | $ | 37,769 | |||||||
| Domestic (U.S. state) | 7,558 | 10,470 | |||||||||
| Foreign (other than U.S.) | 101,121 | 78,301 | |||||||||
| $ | 128,901 | $ | 126,540 | ||||||||
| Deferred tax expense (benefit): | |||||||||||
| Domestic (U.S. federal) (Note a) | $ | (122,166) | $ | 12,794 | |||||||
| Domestic (U.S. state) (Note b) | (32,112) | 5,975 | |||||||||
| Foreign (other than U.S.) | (3,654) | 17,841 | |||||||||
| $ | (157,932) | $ | 36,610 | ||||||||
| Total income tax expense (benefit) | $ | (29,031) | $ | 163,150 | |||||||
(a)For the year ended December 31, 2023, the amount includes a U.S. federal tax benefit on the transfer of intellectual property rights amounting to $138,390.
(b)For the year ended December 31, 2023, the amount includes a state tax benefit on the transfer of intellectual property rights amounting to $33,800.
| Year ended December 31, | |||||
| 2025 | |||||
| Foreign (other than Bermuda) | |||||
| Current tax expense | $ | 157,710 | |||
| Deferred tax expense (benefit) | $ | 19,943 | |||
| Total income tax expense (benefit) | $ | 177,653 | |||
22. Income taxes (Continued)
In accordance with the guidance in effect prior to the Company's adoption of ASU 2023-09, income tax expense (benefit) attributable to income from continuing operations for the years ended December 31, 2023 and 2024 differed from the amounts computed by applying the U.S. federal statutory income tax rate of 21% to income before income tax expense (benefit) as follows:
| Year ended December 31, | |||||||||||
| 2023 | 2024 | ||||||||||
| Income before income tax expense (benefit) | $ | 602,224 | $ | 676,820 | |||||||
| Statutory income tax rates | 21 | % | 21 | % | |||||||
| Computed expected income tax expense | 126,467 | 142,132 | |||||||||
| Increase (decrease) in income taxes resulting from: | |||||||||||
| Foreign tax rate differential | 16,455 | 14,464 | |||||||||
| Tax benefit from tax holiday | (3,877) | (4,980) | |||||||||
| Foreign-derived intangible income | (11,281) | (20,683) | |||||||||
| Non-deductible expenses | 2,932 | 6,058 | |||||||||
| Impact of change in tax rates (Note c) | (36,099) | 1,709 | |||||||||
| Change in valuation allowance (Note d) | (121,358) | 4,012 | |||||||||
| Unrecognized tax benefits | (5,563) | (5,362) | |||||||||
| Internal transfer of intellectual property rights (Note d) | (7,835) | — | |||||||||
| State income taxes (Note e) | 9,245 | 16,445 | |||||||||
| Excess tax benefit on share-based compensation | (5,274) | (114) | |||||||||
| Others | 7,157 | 9,469 | |||||||||
| Reported income tax expense (benefit) | $ | (29,031) | $ | 163,150 | |||||||
(c)The amount shown for the year ended December 31, 2023 includes a benefit of $35,771 resulting from a new income tax enacted in Bermuda on December 27, 2023, the impact of which has been fully offset by a valuation allowance.
(d)For the year ended December 31, 2023, the Company recorded an income tax benefit of $169,945 in connection with an intercompany transfer of certain intellectual property rights from certain non-U.S. subsidiaries to certain wholly-owned US subsidiaries in an effort to better align with the Company’s business operations, which is reflected in the rows titled “change in valuation allowance” and “internal transfer of intellectual property rights” in the reconciliation table above.
(e)The amount shown for the year ended December 31, 2023 does not include a state tax benefit on the transfer of intellectual property rights amounting to $33,800.
22. Income taxes (Continued)
In accordance with the guidance prescribed in ASU 2023-09, income tax expense (benefit) attributable to income from continuing operations for the year ended December 31, 2025 differed from the amounts computed by applying the Bermuda statutory income tax rate of 15%, the income tax rate of our country of domicile, to income before income tax expense (benefit) as follows:
Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Total | % | ||||||||||
| Income before income tax expense | $ | 730,147 | |||||||||
| Bermuda statutory income tax rate | 109,522 | 15.0 | % | ||||||||
| Bermuda | |||||||||||
| Changes in valuation allowances | 4,644 | 0.6 | % | ||||||||
| Nontaxable or Nondeductible items | 1,087 | 0.1 | % | ||||||||
| Foreign tax effects | |||||||||||
| India | |||||||||||
| Effect of rates different than statutory | 35,290 | 4.8 | % | ||||||||
| Other | 2,687 | 0.4 | % | ||||||||
| United States | |||||||||||
| Effect of rates different than statutory | 17,367 | 2.4 | % | ||||||||
| Non-deductible compensation | 6,887 | 0.9 | % | ||||||||
| State and local income taxes | 11,389 | 1.6 | % | ||||||||
| Foreign-derived intangible income | (22,342) | (3.1) | % | ||||||||
| Other | (4,594) | (0.6) | % | ||||||||
| Other foreign jurisdictions | 12,506 | 1.8 | % | ||||||||
| Worldwide changes in unrecognized tax benefits | 3,210 | 0.4 | % | ||||||||
| Reported income tax expense | $ | 177,653 | 24.3 | % | |||||||
The effect of the tax holiday on both basic and diluted earnings per share was $0.02, $0.03 and $0.03, respectively, for the years ended December 31, 2023, 2024 and 2025.
The income taxes paid by jurisdiction, in accordance with the disclosure requirements of ASU 2023-09, for the year ended December 31, 2025, are as follows:
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| Foreign: | ||||||||
| India | $ | 61,541 | ||||||
| United Kingdom | 12,013 | |||||||
| United States federal | 29,328 | |||||||
| All other foreign | 40,763 | |||||||
| Income taxes, net of amounts refunded | $ | 143,645 | ||||||
22. Income taxes (Continued)
The components of the Company’s deferred tax balances as of December 31, 2024 and 2025 are as follows:
| As of December 31, | |||||||||||
| 2024 | 2025 | ||||||||||
| Deferred tax assets | |||||||||||
| Net operating loss carryforwards | $ | 81,563 | $ | 85,303 | |||||||
| Accrued expenses and other liabilities | 68,218 | 79,606 | |||||||||
| Allowance for credit losses | 5,209 | 8,383 | |||||||||
| Property, plant and equipment, net | 9,697 | 9,927 | |||||||||
| Lease liabilities | 40,707 | 45,051 | |||||||||
| Share-based compensation | 20,801 | 16,986 | |||||||||
| Intangible assets, net | 184,623 | 160,773 | |||||||||
| Retirement benefits | 6,113 | 4,802 | |||||||||
| Contract liabilities | 13,361 | 7,906 | |||||||||
| Tax credit carryforwards | 31,094 | 30,087 | |||||||||
| Derivative instruments | 10,532 | 22,103 | |||||||||
| Others | 11,558 | 11,315 | |||||||||
| Total deferred tax assets | $ | 483,476 | $ | 482,242 | |||||||
| Less: Valuation allowance | (105,661) | (110,877) | |||||||||
| Total deferred tax assets, net of valuation allowance | $ | 377,815 | $ | 371,365 | |||||||
| Deferred tax liabilities | |||||||||||
| Property, plant and equipment, net | 1,751 | 1,205 | |||||||||
| Right-of use assets | 34,682 | 39,465 | |||||||||
| Retirement benefits | 1,350 | 3,393 | |||||||||
| Investments in foreign subsidiaries not indefinitely reinvested | 11,009 | 13,205 | |||||||||
| Derivative instruments | 1,149 | 2,182 | |||||||||
| Goodwill | 59,762 | 61,759 | |||||||||
| Others | 14,544 | 12,448 | |||||||||
| Total deferred tax liabilities | $ | 124,247 | $ | 133,657 | |||||||
| Net of deferred tax assets and liabilities | $ | 253,568 | $ | 237,708 | |||||||
| As of December 31, | |||||||||||
| Classified as | 2024 | 2025 | |||||||||
| Deferred tax assets non-current | $ | 269,476 | $ | 258,789 | |||||||
| Deferred tax liabilities non-current | 15,908 | 21,081 | |||||||||
| $ | 253,568 | $ | 237,708 | ||||||||
22. Income taxes (Continued)
The change in the Company’s total valuation allowance for deferred tax assets as of December 31, 2023, 2024 and 2025 is as follows:
| Year ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Opening valuation allowance | $ | 222,655 | $ | 101,438 | $ | 105,661 | |||||||||||
| Reduction during the year through continuing operations | (162,138) | (3,603) | (1,266) | ||||||||||||||
| Addition during the year through continuing operations | 40,921 | 7,826 | 6,482 | ||||||||||||||
| Net change in valuation allowance | $ | (121,217) | $ | 4,223 | $ | 5,216 | |||||||||||
| Closing valuation allowance | $ | 101,438 | $ | 105,661 | $ | 110,877 | |||||||||||
During the year ended December 31, 2023, the Company completed an intercompany transfer of certain intellectual property rights from certain non-US subsidiaries to certain wholly-owned US subsidiaries in an effort to better align with the Company's business operations. As a result of this transfer, the Company received a step-up in tax basis of the transferred intellectual property assets to their current fair market value under applicable tax law. The determination of fair value involves judgments with respect to future revenue growth, operating margins and discount rates. The step-up in basis will be amortizable against future taxable income and, accordingly, the Company recognized a one-time income tax benefit of $169,945. The Company expects to realize the deferred tax asset recorded as a result of the intellectual property transfer and will periodically assess such realizability. The tax-deductible amortization related to the transferred intellectual property rights will be recognized over a 15-year period.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences are deductible. In order to fully realize a deferred tax asset, the Company must generate future taxable income prior to the expiration of the deferred tax asset under applicable law.
Management considers the scheduled reversal of deferred tax liabilities, carryback availability and projected taxable income in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods during which the Company’s deferred tax assets are deductible, management believes that it is more likely than not that the Company will realize the benefits of its deductible temporary differences and carry forwards, net of the existing valuation allowances as of December 31, 2025. The amount of the Company’s deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
For the years ended December 31, 2023, 2024 and 2025, the Company recognized net excess tax benefits on share-based compensation of $5,274, $114 and $985, respectively, in income tax expense attributable to continuing operations.
As of December 31, 2025, the Company’s deferred tax assets related to federal and national operating loss carryforwards of $457,111 for all countries amounted to $73,327 (excluding state and local operating loss carryforwards). Federal and national operating loss carryforwards of subsidiaries in Bermuda, France, the United Kingdom, Hong Kong, Mauritius, New Zealand, the United States and Luxembourg (for 2016 and prior years) amounted to $354,237 and can be carried forward for an indefinite period.
22. Income taxes (Continued)
The Company’s remaining federal and national operating loss carryforwards expire as set forth in the table below:
| Europe | Others | |||||||||||||
| Year ending December 31, | ||||||||||||||
| 2026 | $ | 610 | $ | 258 | ||||||||||
| 2027 | — | 211 | ||||||||||||
| 2028 | — | 49 | ||||||||||||
| 2029 | 805 | 64 | ||||||||||||
| 2030 | 2,762 | 326 | ||||||||||||
| 2032 | — | 237 | ||||||||||||
| 2034 | 18,820 | 69 | ||||||||||||
| 2035 | 7,357 | — | ||||||||||||
| 2036 | 63,373 | — | ||||||||||||
| 2037 | — | 184 | ||||||||||||
| 2041 | 427 | — | ||||||||||||
| 2042 | 7,322 | — | ||||||||||||
| $ | 101,476 | $ | 1,398 | |||||||||||
In the table above, “Europe” includes federal and national operating loss carryforwards of subsidiaries in Bulgaria, Czech Republic, Slovakia, Poland and Luxembourg, while “Others” includes net operating loss carryforwards of subsidiaries in Argentina, China, Colombia, India, Japan and the Philippines.
As of December 31, 2025, the Company had additional deferred tax assets of $11,976 for state and local operating loss carryforwards of $187,868 in all countries, of which $146,082 will expire in various years from 2026 through 2044. The remaining $41,786 of state and local net operating loss carryforwards can be carried forward for an indefinite period.
As of December 31, 2025, the Company had total United States foreign tax credit carryforwards of $30,087, which will expire as set forth in the table below:
| Year ending December 31, | Amount | ||||
| 2027 | $ | 4,676 | |||
| 2028 | 3,217 | ||||
| 2029 | 1,833 | ||||
| 2030 | 832 | ||||
| 2031 | 5,341 | ||||
| 2032 | 2,599 | ||||
| 2033 | 5,788 | ||||
| 2034 | 5,120 | ||||
| 2035 | 681 | ||||
| $ | 30,087 | ||||
22. Income taxes (Continued)
The Company plans to indefinitely reinvest the subsidiaries’ undistributed earnings, except for those earnings for which a deferred tax liability has already been accrued or which can be repatriated in a tax-free manner. Accordingly, with limited exceptions, the Company does not accrue any income, distribution or withholding taxes that would arise if such earnings were repatriated. Due to the Company’s changing corporate structure, the various methods that are available to repatriate earnings and uncertainty relative to the applicable taxes at the time of repatriation, it is not practicable to determine the amount of tax that would be imposed upon repatriation. If undistributed earnings are repatriated in the future, or are no longer deemed to be indefinitely reinvested, the Company will accrue the applicable amount of taxes associated with such earnings at that time.
The Company reports its gain (loss) on derivatives designated as cash flow hedges, actuarial gain (loss) on retirement benefits and currency translation adjustment, net of income taxes to the extent applicable, in OCI.
The following table summarizes activities related to our unrecognized tax benefits from January 1 to December 31 for each of 2023, 2024 and 2025:
| 2023 | 2024 | 2025 | |||||||||||||||
| Opening Balance at January 1 | $ | 25,430 | $ | 19,236 | $ | 14,063 | |||||||||||
| Increase related to prior year tax positions, including recorded in acquisition accounting | 1,385 | 27 | 24 | ||||||||||||||
| Decrease related to prior year tax positions for other reasons | (2,405) | — | — | ||||||||||||||
| Decrease related to prior year tax positions due to lapse of applicable statute of limitation | (4,658) | (4,149) | (2,958) | ||||||||||||||
| Increase related to current year tax positions | 677 | 256 | 5,700 | ||||||||||||||
| Decrease related to settlements with taxing authorities | (1,144) | (967) | (54) | ||||||||||||||
| Effect of exchange rate changes | (49) | (340) | (223) | ||||||||||||||
| Closing Balance at December 31 | $ | 19,236 | $ | 14,063 | $ | 16,552 | |||||||||||
As of December 31, 2024 and 2025, the Company had unrecognized tax benefits amounting to $14,036 and $16,552, respectively, which, if recognized, would affect the Company's effective tax rate.
As of December 31, 2024 and 2025, the Company had accrued $3,141 and $3,552, respectively, in interest and $43 and $5, respectively, for penalties relating to income taxes.
During the years ended December 31, 2023, 2024 and 2025, the Company recognized $220, $(1,387) and $395, respectively, in interest expense (income) related to income taxes.
With certain immaterial exceptions, the Company is no longer subject to U.S. federal, state and local or other U.S. income tax examinations by taxing authorities for years prior to 2019. The Company’s subsidiaries in India and China are open to examination by relevant taxing authorities for tax years beginning on or after April 1, 2019 and January 1, 2016, respectively. The Company regularly reviews the likelihood of additional tax assessments and adjusts its unrecognized tax benefits as additional information or events require.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 26, 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.