Seadrill LtdSDRL
Seadrill Ltd Income Taxes Disclosure
Taxation
(Loss)/profit before income taxes in Bermuda and foreign jurisdictions were as follows:
| (In $ millions) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Bermuda | (127) | 123 | (104) | ||||||||||||||
| Foreign | 76 | 210 | 421 | ||||||||||||||
| (Loss)/profit before income taxes | (51) | 333 | 317 | ||||||||||||||
Income taxes consisted of the following:
| (In $ millions, except percentages) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Current tax expense/(benefit): | |||||||||||||||||
| Bermuda | — | — | — | ||||||||||||||
| Foreign | 4 | (95) | 30 | ||||||||||||||
| Deferred tax expense/(benefit): | |||||||||||||||||
| Bermuda | — | — | — | ||||||||||||||
| Foreign | 22 | (18) | (13) | ||||||||||||||
| Total income tax expense/(benefit) | 26 | (113) | 17 | ||||||||||||||
| Effective tax rate | (51.0) | % | (33.9) | % | 5.4 | % | |||||||||||
A reconciliation of the Bermuda statutory income tax rate of 15% to the consolidated effective tax rate for the year ended December 31, 2025 is as follows:
| (In $ millions, except percentages) | Year ended December 31, 2025 | ||||||||||
| Expected income tax benefit at Bermuda statutory rate | (8) | 15.0 | % | ||||||||
| Foreign tax effects | |||||||||||
| Brazil | |||||||||||
| Statutory income tax rate differential | 5 | (9.6) | % | ||||||||
| Nondeductible expenses | 3 | (5.1) | % | ||||||||
| Changes in valuation allowance | (4) | 7.1 | % | ||||||||
| Luxembourg | |||||||||||
| Adjustment to prior year deferred taxes | 20 | (38.4) | % | ||||||||
| Changes in valuation allowance | (3) | 5.9 | % | ||||||||
| Mexico | |||||||||||
| Statutory income tax rate differential | (2) | 4.7 | % | ||||||||
| Nondeductible taxes | 8 | (15.9) | % | ||||||||
| Norway | |||||||||||
| Return to provision adjustments | (11) | 21.6 | % | ||||||||
| Adjustment to prior year deferred taxes | 19 | (37.3) | % | ||||||||
| Foreign exchange effects | (3) | 6.6 | % | ||||||||
| Statutory accounting adjustments | (7) | 13.2 | % | ||||||||
| Other | (2) | 4.4 | % | ||||||||
| Switzerland | |||||||||||
| Statutory income tax rate differential | (8) | 15.6 | % | ||||||||
| Adjustment to prior year deferred taxes | (2) | 4.2 | % | ||||||||
| Subnational taxes | 4 | (8.6) | % | ||||||||
| United Kingdom | |||||||||||
| Statutory income tax rate differential | 2 | (4.4) | % | ||||||||
| Adjustment to prior year deferred taxes | 2 | (4.8) | % | ||||||||
| Other | (2) | 3.2 | % | ||||||||
| United States | |||||||||||
| Nondeductible share based compensation | 6 | (11.9) | % | ||||||||
| Effect of foreign earnings not permanently reinvested | 3 | (6.8) | % | ||||||||
| Other | 4 | (8.2) | % | ||||||||
| Other jurisdictions | 7 | (12.5) | % | ||||||||
| Changes in valuation allowance | 12 | (24.1) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Nontaxable equity in losses of equity method investment (net of tax) | 2 | (3.1) | % | ||||||||
| Changes in deferred taxes due to intragroup transfer | 6 | (11.0) | % | ||||||||
| Changes in unrecognized tax benefits | (25) | 49.2 | % | ||||||||
| Income tax expense | 26 | (51.0) | % | ||||||||
A reconciliation of the Bermuda statutory income tax rate of 0% to the consolidated effective tax rate for the years ended December 31, 2024 and December 31, 2023 is as follows:
| (In $ millions, except percentages) | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||||||||||||
| Effect of change in unrecognized tax benefits | (115) | (34.5) | % | 4 | 1.3 | % | ||||||||||||||||||||
| Effect of foreign earnings not permanently reinvested | 1 | 0.3 | % | 1 | 0.3 | % | ||||||||||||||||||||
| Effect of taxable income in various countries | 1 | 0.3 | % | 12 | 3.8 | % | ||||||||||||||||||||
| Income tax (benefit)/expense | (113) | (33.9) | % | 17 | 5.4 | % | ||||||||||||||||||||
Deferred income taxes
Net deferred tax assets are comprised of the following components:
Deferred tax assets:
| (In $ millions) | December 31, 2025 | December 31, 2024 | |||||||||
| Tax losses carried forward | 1,083 | 1,025 | |||||||||
| Property, plant and equipment | 199 | 245 | |||||||||
| Provisions | 34 | 29 | |||||||||
| Intangibles | — | 3 | |||||||||
| Pensions and stock options | 3 | 5 | |||||||||
| Other | 10 | 13 | |||||||||
| Gross deferred tax assets | 1,329 | 1,320 | |||||||||
| Valuation allowance | (1,285) | (1,257) | |||||||||
| Deferred tax assets, net of valuation allowance | 44 | 63 | |||||||||
Deferred tax liabilities:
| (In $ millions) | December 31, 2025 | December 31, 2024 | |||||||||
| Unremitted earnings of subsidiaries | 14 | 11 | |||||||||
| Gross deferred tax liabilities | 14 | 11 | |||||||||
| Net deferred tax assets | 30 | 52 | |||||||||
In December 2023, legislation implementing a corporate income tax in Bermuda received Governor's Assent. The Bermuda income tax is effective beginning on January 1, 2025, with tax imposed at the statutory tax rate of 15%. The CIT Act provides an elective Economic Transition Adjustment under which a Bermuda Constituent Entity may, as of the commencement of the regime, adjust the tax basis of its assets and liabilities to fair value, and, if such election is not made, permits a carryforward of certain pre‑effective‑date tax losses into post‑effective‑date taxable years. As of December 31, 2025 the Group's Bermuda constituent entities had tax loss carryforwards of $3.1 billion available to offset future taxable income.
As of December 31, 2025, deferred tax assets related to tax loss carryforwards was $1,083 million (December 31, 2024: $1,025 million). Subject to limitations under relevant tax law, the tax loss carryforwards can be used to offset future taxable income. Tax loss carryforwards which were generated in various jurisdictions, include $691 million (December 31, 2024: $627 million) that will not expire and $392 million (December 31, 2024: $398 million) that will expire between 2026 and 2045 if not utilized (December 31, 2024: between 2025 and 2044).
We establish a valuation allowance for deferred tax assets when it is more likely than not that the benefit from the deferred tax asset will not be realized. The amount of deferred tax assets considered realizable could increase or decrease in the near term if our estimates of future taxable income change. Our valuation allowance consists primarily of $1,046 million on tax loss carryforwards as of December 31, 2025 (December 31, 2024: $968 million).
Uncertain tax positions
As of December 31, 2025, we had a total amount of unrecognized tax benefits of $37 million excluding interest and penalties. The changes related to unrecognized tax benefits were as follows:
| (In $ millions) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Balance at the beginning of the period | 42 | 150 | 82 | ||||||||||||||
| Increases as a result of acquisition of Aquadrill | — | — | 71 | ||||||||||||||
| Increases as a result of positions taken in prior periods | 23 | — | 5 | ||||||||||||||
| Increases as a result of positions taken during the current period | — | — | 1 | ||||||||||||||
| Decreases as a result of positions taken in prior periods | (24) | (3) | (8) | ||||||||||||||
| Decreases due to settlements | — | (105) | — | ||||||||||||||
| Decreases as a result of a lapse of the applicable statute of limitations | (4) | — | (1) | ||||||||||||||
| Balance at the end of the period | 37 | 42 | 150 | ||||||||||||||
The uncertain tax positions are included in "Other non-current liabilities" on our Consolidated Balance Sheets and are comprised as follows:
| (In $ millions) | December 31, 2025 | December 31, 2024 | |||||||||
| Gross unrecognized tax benefits excluding interest and penalties | 37 | 42 | |||||||||
| Interest and penalties | 8 | 28 | |||||||||
| Offset against deferred tax assets | (23) | (15) | |||||||||
| Total unrecognized tax benefits included as "Other non-current liabilities" | 22 | 55 | |||||||||
The decrease in gross unrecognized tax benefits excluding interest and penalties compared to December 31, 2024 was principally attributable to resolution of uncertain tax positions in respect to Ghana, following a decision of Ghana’s Supreme Court in an unrelated taxpayer’s litigation, and Norway, partially offset by an unrecognized tax benefit recorded upon notification of an assessment decision by the Norwegian Tax Administration.
Accrued interest and penalties in respect of unrecognized tax benefits totaled $8 million at December 31, 2025 (December 31, 2024: $28 million) and are included in "Other non-current liabilities" on our Consolidated Balance Sheets. During the year ended December 31, 2025, we recognized a benefit of $20 million (December 31, 2024: $10 million) related to interest and penalties for unrecognized tax benefits on the income tax (expense)/benefit line in the Consolidated Statement of Operations.
As of December 31, 2025, $22 million (December 31, 2024: $55 million) of our unrecognized tax benefits, including penalties and interest, would have a favorable impact on the Company’s effective tax rate if recognized.
Tax returns and open years
We are subject to taxation in various jurisdictions. Tax authorities in certain jurisdictions examine our tax returns and some have issued assessments. We are defending our tax positions in those jurisdictions.
Brazil’s tax authorities have issued a series of income tax assessments with respect to our returns for certain years up to 2017 for an aggregate amount equivalent to $144 million, including interest and penalties accruing through December 31, 2025. The assessment for the 2009 and 2010 years is being litigated in Brazil’s courts. Please refer to Note 24 - "Commitments and contingencies" for further details.
The Mexican tax authorities have issued a series of assessments with respect to our returns for certain years up to 2014 for an aggregate amount equivalent to $125 million. We are robustly contesting these assessments including filing relevant appeals.
An adverse outcome in our appeals against these proposed assessments could result in a material adverse impact on our Consolidated Balance Sheets, Statements of Operations and Cash Flows.
The following table summarizes the tax years that remain subject to examination by major taxable jurisdictions in which we operate:
| Jurisdiction | Years open to examination | ||||
| Brazil | 2021-2025 | ||||
| Norway | 2021-2025 | ||||
| Switzerland | 2019-2025 | ||||
| United Kingdom | 2023-2025 | ||||
| United States | 2022-2025 | ||||
Net taxes paid
Income taxes paid (net of refunds) by jurisdiction were as follows:
| (In $ millions) | Year ended December 31, 2025 | ||||
| United States | 11 | ||||
| Other | 1 | ||||
| Total net taxes paid | 12 | ||||
Other
On July 4, 2025, the U.S. enacted the OBBBA. OBBBA’s tax provisions include, among other tax law changes, the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and provisions allowing accelerated cost recovery deductions for qualified property. We do not expect the legislation to have a material impact on our tax liability, financial condition, or results of operations.
On December 20, 2021, the OECD released the Pillar Two Model Rules, establishing a global minimum tax regime that provides for the taxation of large multinational corporations at a minimum rate of 15%. Following the OECD’s December 2021 agreement on Pillar Two, several countries in which the Company operates have enacted domestic legislation implementing certain aspects of the global minimum tax rules, some of which are effective or became effective in 2024 and 2025. For the year ended December 31, 2025, Pillar Two did not have a material impact on the Company’s tax liability or results of operations.
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.