SEC Filings

20-F
WNS (HOLDINGS) LTD filed this Form 20-F on 05/16/2018
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Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

23. Income taxes

The domestic and foreign source component of profit / (loss) before income taxes is as follows:

 

     Year ended March 31,  
     2018      2017      2016  

Domestic

   $ (4,439    $ (5,342    $ (4,121

Foreign

     106,306        60,635        85,181  
  

 

 

    

 

 

    

 

 

 

Profit before income taxes

   $ 101,867      $ 55,293      $ 81,060  
  

 

 

    

 

 

    

 

 

 

The Company’s provision for income taxes consists of the following:

 

     Year ended March 31,  
     2018      2017      2016  

Current taxes

        

Domestic taxes

   $ —        $ —        $ —    

Foreign taxes

     24,494        25,785        19,615  
  

 

 

    

 

 

    

 

 

 
     24,494        25,785        19,615  
  

 

 

    

 

 

    

 

 

 

Deferred taxes

        

Domestic taxes

     —          —          —    

Foreign taxes

     (9,063      (8,255      1,565  
  

 

 

    

 

 

    

 

 

 
     (9,063      (8,255      1,565  
  

 

 

    

 

 

    

 

 

 
        
  

 

 

    

 

 

    

 

 

 

Provision for income taxes

   $ 15,431      $ 17,530      $ 21,180  
  

 

 

    

 

 

    

 

 

 

Domestic taxes are nil as the Company is subject to income tax in Jersey, Channel Islands at a rate of 0%. Foreign taxes are based on applicable tax rates in each subsidiary’s jurisdiction.

On July 27, 2017, National Company Law Tribunal in India approved the scheme of amalgamation of Value Edge Research Services Limited (“Value Edge”) and WNS Global Services Private Limited (“WNS India”), pursuant to which, Value Edge was merged with and into WNS India. The merger resulted in the creation of a tax base of goodwill and certain other identifiable intangible assets in the financial statements of WNS India. WNS India is entitled to claim a tax benefit for amortization of goodwill and intangible assets in its future tax returns. The Company had previously recorded a deferred tax liability for the temporary differences between the tax base of identifiable intangible assets and its carrying amount in the Company’s consolidated financial statements upon the acquisition of Value Edge. As a result, the carrying value of such liability as at the effective date of the scheme of amalgamation, amounting to $1,686, was derecognized during the year ended March 31, 2018.

The Company in fiscal 2012 started operations in delivery centers in Pune, Mumbai and Chennai, India registered under the Special Economic Zone (“SEZ”) scheme. These operations were eligible for a 100% income tax exemption until fiscal 2016 and are eligible for a 50% income tax exemption from fiscal 2017 to fiscal 2026. During fiscal 2015, the Company started operations in new delivery centers in Gurgaon and Pune, India registered under the SEZ scheme. These operations are eligible for a 100% income tax exemption until fiscal 2019, and a 50% income tax exemption from fiscal 2020 to fiscal 2029. During fiscal 2018, the Company started operations in new delivery centers in Pune and Gurgaon, India registered under the SEZ scheme that are eligible for a 100% income tax exemption until fiscal 2022, and a 50% income tax exemption from fiscal 2023 to fiscal 2032. The Government of India pursuant to the Indian Finance Act, 2011 has also levied a minimum alternate tax (“MAT”) on the book profits earned by the SEZ units at the prevailing rate which is currently 21.55%. The Company’s operations in Costa Rica are eligible for a 50% income tax exemption from fiscal 2018 to fiscal 2021. During fiscal 2013, the Company started operations in a delivery center in Techno Plaza II, Manila which was eligible for a tax exemption that expired in fiscal 2017. During fiscal 2016, the Company started operations in a new delivery center in the Philippines which is eligible for a tax exemption until fiscal 2020. During fiscal 2017, the Company opened two additional delivery centers in Iloilo and Alabang, Philippines which are eligible for a 100% tax exemption until fiscal 2021. During fiscal 2018, the Company opened an additional delivery center in Alabang, Philippines which is eligible for a 100% tax exemption until fiscal 2022. The Government of Sri Lanka has exempted the profits earned from export revenue from tax, which enables the Company’s Sri Lankan subsidiary to continue to claim a tax exemption until fiscal 2018 and would be taxed at 14% on net basis with effect from April 1, 2018.

The “Tax Cuts and Jobs Act of 2017” was enacted on December 22, 2017 with an effective date of January 1, 2018. The reduction in the corporate tax rate from 35% to 21% will have an impact on the various current and deferred tax items recorded by the Company’s subsidiaries. At March 31, 2018, the Company has not completed its initial accounting for the tax effects of the Act. However, a reasonable estimate of the effects of such enactment has been made by recognizing a net one-time provisional tax benefit of $5,212, primarily resulting from the adjustments to its deferred tax balances arising from intangibles, stock compensation, losses and accruals and transition tax on undistributed earnings of foreign subsidiaries. A provisional amount of $5,212 has been included as a component of our income tax expense for fiscal 2018, thereby reducing the effective tax rate by 5.12% for fiscal 2018. The Company is still analyzing certain aspects of the Act and refining its calculations, and expects to update these provisional amounts during the measurement period ending on December 31, 2018, as additional information is obtained, prepared and analyzed.

If the income tax exemption was not available, the additional income tax expense at the respective statutory rates in India, Sri Lanka and Philippines would have been approximately $9,368, $5,171 and $5,072 for the years ended March 31, 2018, 2017 and 2016, respectively. Such additional tax would have decreased the basic and diluted earnings per share for the year ended March 31, 2018 by $0.19 and $0.18, respectively ($0.10 and $0.10, respectively for the year ended March 31, 2017 and $0.10 and $0.09, respectively, for the year ended March 31, 2016).

 

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