|WNS (HOLDINGS) LTD filed this Form 20-F on 05/16/2018|
The SEZ legislation has been criticized on economic grounds by the International Monetary Fund and the SEZ legislation may be challenged by certain non-governmental organizations. It is possible that, as a result of such political pressures, the procedure for obtaining benefits under the SEZ legislation may become more onerous, the types of land eligible for SEZ status may be further restricted or the SEZ legislation may be amended or repealed.
In addition to these tax holidays, our Indian subsidiaries are also entitled to certain benefits under relevant state legislation and regulations. These benefits include the preferential allotment of land in industrial areas developed by state agencies, incentives for captive power generation, rebates and waivers in relation to payments for transfer of property and registration (including for purchase or lease of premises) and commercial usage of electricity.
Since fiscal 2008, we have become subject to minimum alternate tax (MAT) and we have been required to pay additional taxes. The Government of India, pursuant to the Indian Finance Act, 2011, has also levied MAT on the book profits earned by the SEZ units at the prevailing tax rate, which is currently 21.55% and was 21.34% in fiscal 2018, 2017 and 2016. To the extent MAT paid exceeds the actual tax payable on our taxable income, we would be able to offset such MAT credits from tax payable in the succeeding 15 years, subject to the satisfaction of certain conditions. During fiscal 2018, 2017 and 2016, we have offset Nil, Nil and $9.2 million, respectively, of our MAT payments for earlier years from our increased tax liability based on our taxable income following the expiry of our tax holiday on STPI effective fiscal 2012.
The Government of India may enact new tax legislation that could impact the way we are taxed in the future. For example, the Government of India has issued guidelines on the GAAR, which came into effect on April 1, 2017, and which is intended to curb sophisticated tax avoidance. Under the GAAR, a business arrangement will be deemed an impermissible avoidance arrangement if the main purpose of the arrangement is to obtain tax benefits. Although the full implications of the GAAR are presently still unclear, if we are deemed to have violated any of its provisions, we may face an increase to our tax liability. However, we do not expect the GAAR to have a material adverse impact on our operations. The Government of India has passed the Goods and Service Tax Act (GST Act), which is effective from July 1, 2017. The majority of the various existing indirect tax levies have since been subsumed by the goods and services tax payable under the GST Act. Based on the current GST law and the rules, we do not expect a significant impact on our operations. See Part I Item 3. Key Information D. Risk Factors Risks Related to Key Delivery Locations New tax legislation and the results of actions by taxing authorities may have an adverse effect on our operations and our overall tax rate.
During fiscal 2013, we started operations in a delivery center in the Philippines located in Techno Plaza II, Manila which was eligible for a tax exemption that expired in fiscal 2017. We have filed an application for extension of this tax exemption for an additional year. Accordingly, we expect to continue to avail ourselves of this tax exemption in fiscal 2018. During fiscal 2016, we started operations in a delivery center in Iloilo, Philippines which is also eligible for a tax exemption that will expire in fiscal 2020. During fiscal 2017, we started operations in additional delivery centers in Iloilo and Alabang, Philippines which are also eligible for tax exemption that will expire in fiscal 2021. During fiscal 2018, we started an additional delivery center in Alabang, Philippines which is eligible for a 100% tax exemption until fiscal 2022. Following the expiry of the tax exemption, income generated by WNS Global Services Philippines Inc. will be taxed at the prevailing special tax rate, which is currently 5.0% on gross margin.
Our operations in Sri Lanka are eligible to claim income tax exemption under the Sri Lanka Inland Revenue Act for profits earned from export revenue until fiscal 2018 and would be taxed at 14% on net basis with effect from April 1, 2018.
Our subsidiary in Costa Rica is eligible for a 100.0% income tax exemption from fiscal 2010 until fiscal 2017 and a 50.0% income tax exemption from fiscal 2018 to fiscal 2021.