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Income taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes Income tax expense (benefit) for the years ended December 31, 2019, 2020 and 2021 is allocated as follows:
| Year ended December 31,
| 2019 |  | 2020 |  | 2021
Income from continuing operations | $ | 94,536 |  |  | $ | 92,201 |  |  | $ | 113,681 |
Other comprehensive income: |  |  |  |  |
Unrealized gains (losses) on cash flow hedges | (4,058) |  |  | (3,327) |  |  | 5,265 |
Retirement benefits | (2,720) |  |  | (894) |  |  | 3,859 |
Retained earnings: |  |  |  |  |
Deferred tax benefit recognized on adoption of ASU 2016-13 | — |  |  | (935) |  |  | — |
The components of income before income tax expense from continuing operations are as follows:
| Year ended December 31,
| 2019 |  | 2020 |  | 2021
Domestic (U.S.) | $ | 27,783 |  |  | $ | 122,497 |  |  | $ | 126,107 |
Foreign (other than U.S.) | 371,634 |  |  | 277,980 |  |  | 357,022 |
Income before income tax expense | $ | 399,417 |  |  | $ | 400,477 |  |  | $ | 483,129 |
23. Income taxes (Continued) Income tax expense (benefit) attributable to income from continuing operations consists of:
| Year ended December 31,
| 2019 |  | 2020 |  | 2021
Current tax expense: |  |  |  |  |
Domestic (U.S. federal) | $ | 2,854 |  |  | $ | 23,668 |  |  | $ | 34,538 |
Domestic (U.S. state) | 3,908 |  |  | 10,765 |  |  | 5,605 |
Foreign (other than U.S.) | 104,089 |  |  | 80,355 |  |  | 82,801 |
| $ | 110,851 |  |  | $ | 114,788 |  |  | $ | 122,944 |
Deferred tax expense (benefit): |  |  |  |  |
Domestic (U.S. federal) | $ | 2,669 |  |  | $ | (7,329) |  |  | $ | (6,039) |
Domestic (U.S. state) | (1,679) |  |  | (3,770) |  |  | 232 |
Foreign (other than U.S.) | (17,305) |  |  | (11,488) |  |  | (3,456) |
| $ | (16,315) |  |  | $ | (22,587) |  |  | $ | (9,263) |
Total income tax expense (benefit) | $ | 94,536 |  |  | $ | 92,201 |  |  | $ | 113,681 |
Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S. federal statutory income tax rate of 21% to income before income taxes as a result of the following:
| Year ended December 31,
| 2019 |  | 2020 |  | 2021
Income before income tax expense | $ | 399,417 |  |  | $ | 400,477 |  |  | $ | 483,129 |
Statutory tax rates | 21 | % |  | 21 | % |  | 21 | %
Computed expected income tax expense | 83,878 |  |  | 84,100 |  |  | 101,457 |
Increase (decrease) in income taxes resulting from: |  |  |  |  |
Foreign tax rate differential | 31,121 |  |  | 15,456 |  |  | 10,747 |
Tax benefit from tax holiday | (21,393) |  |  | (16,063) |  |  | (3,159) |
True-up of prior years tax liability | (3,568) |  |  | (3,420) |  |  | 7,590 |
Interest income on income tax refund | — |  |  | — |  |  | (7,780) |
Non-deductible expenses | 2,152 |  |  | 372 |  |  | 1,755 |
Effect of change in tax rates | 6,497 |  |  | 453 |  |  | 1,740 |
Change in valuation allowance | 10,515 |  |  | 142,733 |  |  | 6,244 |
Unrecognized tax benefits | 5,502 |  |  | 3,228 |  |  | (327) |
Employment related tax incentive | (5,239) |  |  | — |  |  | (3,930) |
Internal restructuring | — |  |  | (129,688) |  |  | — |
State income taxes | 2,229 |  |  | 6,995 |  |  | 5,837 |
Excess tax benefit on share-based compensation | (2,743) |  |  | (7,310) |  |  | (7,773) |
Others* | (14,415) |  |  | (4,655) |  |  | 1,280 |
Reported income tax expense (benefit) | $ | 94,536 |  |  | $ | 92,201 |  |  | $ | 113,681 |
*Following the transfer/closure of certain affiliated entities, deferred tax liabilities recorded against the outside basis difference were reversed amounting to $3,782 during the year ended December 31, 2019. Additionally, during the years ended December 31, 2019 and 2020, the Company created a deferred tax asset on the impairment of one of its intercompany investments for income tax purposes amounting to $8,069 and $8,384, respectively. It was not more likely than not that the resulting net deferred tax asset would be realized. Therefore, a full valuation allowance was established. 23. Income taxes (Continued) A portion of the profits of the Company’s operations is exempt from income tax in India. One of the Company’s Indian subsidiaries has certain units eligible for a tax holiday as a special economic zone ("SEZ") unit in respect of 100% of the export profits it generates for a period of 5 years from commencement, 50% of such profits for the next 5 years (year 6 to year 10 from commencement) and 50% of the profits for an additional period of 5 years (year 11 to year 15 from commencement), subject to the satisfaction of certain capital investment requirements. During the year ended December 31, 2019, the Indian taxing authorities introduced a new tax regime under which a company can elect to pay taxes at a lower tax rate by foregoing certain deductions and exemptions, including SEZ exemptions. The Company has elected to forego applicable Indian tax holidays in order to benefit from the reduced tax rate under the new tax regime after March 31, 2021. The effect of the Indian tax holiday on both basic and diluted earnings per share was $0.11, $0.08 and $0.02, respectively, for the years ended December 31, 2019, 2020 and 2021. The components of the Company’s deferred tax balances as of December 31, 2020 and 2021 are as follows:
| As of December 31,
| 2020 |  | 2021
Deferred tax assets |  |  |
Net operating loss carry forwards | $ | 37,278 |  |  | $ | 37,593 |
Accrued expenses and other liabilities | 70,634 |  |  | 70,802 |
Allowance for credit losses | 9,930 |  |  | 9,000 |
Property, plant & equipment, net | 3,387 |  |  | 4,079 |
Lease liabilities | 59,823 |  |  | 50,091 |
Share-based compensation | 35,424 |  |  | 31,147 |
Intangible assets, net | 165,347 |  |  | 168,737 |
Retirement benefits | 14,761 |  |  | 9,721 |
Contract liabilities | 6,080 |  |  | 8,012 |
Tax credit carry forwards | 8,692 |  |  | 15,724 |
Others | 14,619 |  |  | 10,277 |
Total deferred tax assets | $ | 425,975 |  |  | $ | 415,183 |
Less: Valuation allowance | (206,011) |  |  | (212,192) |
Total deferred tax assets, net of valuation allowance | $ | 219,964 |  |  | $ | 202,991 |
Deferred tax liabilities |  |  |
Intangible assets, net | $ | 21,884 |  |  | $ | 6,598 |
Property, plant and equipment, net | 3,700 |  |  | 1,907 |
Right-of use lease assets | 48,816 |  |  | 40,733 |
Earn-out liabilities | 6,189 |  |  | 5,368 |
Retirement benefits | 6,579 |  |  | 3,404 |
Investments in foreign subsidiaries not indefinitely reinvested | 2,726 |  |  | 1,708 |
Derivative instruments | 2,810 |  |  | 6,153 |
Goodwill | 18,649 |  |  | 29,229 |
Others | 3,453 |  |  | 5,511 |
Total deferred tax liabilities | $ | 114,806 |  |  | $ | 100,611 |
Net of deferred tax assets and liabilities | $ | 105,158 |  |  | $ | 102,380 |
23. Income taxes (Continued)
| As of December 31,
Classified as | 2020 |  | 2021
Deferred tax assets non-current | $ | 106,674 |  |  | $ | 106,322 |
Deferred tax liabilities non-current | 1,516 |  |  | 3,942 |
| $ | 105,158 |  |  | $ | 102,380 |
The change in the Company’s total valuation allowance for deferred tax assets as of December 31, 2019, 2020 and 2021 is as follows:
| Year ended December 31,
| 2019 |  | 2020 |  | 2021
Opening valuation allowance | $ | 51,986 |  |  | $ | 62,628 |  |  | $ | 206,011 |
Reduction during the year | (4,240) |  |  | (35,662) |  |  | (1,206) |
Addition during the year | 14,882 |  |  | 179,045 |  |  | 7,387 |
Closing valuation allowance | $ | 62,628 |  |  | $ | 206,011 |  |  | $ | 212,192 |
During the year ended December 31, 2020, the Company undertook an internal restructuring that involved the transfer of certain marketing intangibles between its Luxembourg subsidiaries for a total of $650,000. The Company had net operating loss carry forwards with a full valuation allowance from prior years that were used to offset the Luxembourg taxable income arising from such transfer. The tax benefits resulting from the step-up of the tax basis of the intangibles transferred are not expected to be realized and a full valuation allowance has been recorded to reduce the deferred tax balances. Accordingly, this internal restructuring did not have any impact on the Company’s income tax expense. 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. Management considers the scheduled reversal of deferred tax liabilities and projected taxable income in making this assessment. 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. 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 differences and carry forwards, net of the existing valuation allowances as of December 31, 2021. 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 carry forward period are reduced. For the years ended December 31, 2019, 2020 and 2021, the Company recognized net excess tax benefits on share-based compensation of $2,743, $7,310 and $7,773, respectively, in income tax expense attributable to continuing operations. As of December 31, 2021, the Company’s deferred tax assets related to net operating loss carry forwards of $145,525 amounted to $34,459 (excluding state net operating losses). Net operating losses of subsidiaries in the United Kingdom, Brazil, Israel, Hong Kong, Germany, Austria, the United States and Luxembourg (for 2016 and prior years) amounted to $47,025 and can be carried forward for an indefinite period. 23. Income taxes (Continued) The Company’s remaining operating loss carry forwards expire as set forth in the table below:
|  | Europe |  | Others
Year ending December 31, |  |  |  |
2022 |  | $ | 57 |  |  | $ | — |
2023 |  | 310 |  |  | 1,039 |
2024 |  | 567 |  |  | 2,225 |
2025 |  | 1,772 |  |  | 2 |
2026 |  | 38 |  |  | 19 |
2028 |  | — |  |  | 94 |
2029 |  | — |  |  | 185 |
2034 |  | 18,820 |  |  | — |
2035 |  | 7,357 |  |  | — |
2036 |  | 63,374 |  |  | — |
2041 |  | — |  |  | 2,641 |
|  | $ | 92,295 |  |  | $ | 6,205 |
In the table above, “Europe” includes net operating losses of subsidiaries in the Czech Republic, the Netherlands, Slovakia, Latvia, Luxembourg and Portugal, while “Others” includes net operating losses of subsidiaries in Japan, the Philippines, China and Canada. As of December 31, 2021, the Company had additional deferred tax assets for U.S. state and local tax loss carry forwards amounting to $3,134 with varying expiration periods, most of which are between 2022 and 2040. As of December 31, 2021, the Company had a total foreign tax credit carry forward of $15,724 for subsidiaries in the United States and India which will expire as set forth in the table below:
Year ending December 31, | Amount
2028 | 6,378 |
2029 | 2,554 |
2030 | 2,665 |
2031 | 3,803 |
2035 | 121 |
2041 | 203 |
| $ | 15,724 |
Undistributed earnings of the Company’s foreign (non-Bermuda) subsidiaries for which a deferred tax liability has not been recognized due to being indefinitely reinvested amounted to approximately $622,521 as of December 31, 2021. The Company plans to indefinitely reinvest its 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. 23. Income taxes (Continued) As of December 31, 2021, $875,924 of the Company’s $899,458 in cash and cash equivalents was held by the Company’s foreign (non-Bermuda) subsidiaries. $3,481 of this cash is held by foreign subsidiaries for which the Company expects to incur and has accrued a deferred tax liability on the repatriation of $9,628 of retained earnings. $872,443 of the Company’s cash and cash equivalents is either held as retained earnings by foreign subsidiaries in jurisdictions where no tax is expected to be imposed upon repatriation or is being indefinitely reinvested. 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. In June 2016, the FASB issued ASU No. 2016-13, requiring measurement and recognition of expected credit losses for financial assets held by the Company. In the quarter ended March 31, 2020, the Company adopted this ASU, effective January 1, 2020, and accordingly recorded deferred tax assets of $935 through retained earnings. The following table summarizes activities related to our unrecognized tax benefits from January 1 to December 31 for each of 2020 and 2021:
| 2020 |  | 2021
Opening Balance at January 1 | $ | 31,029 |  |  | $ | 34,300 |
Increase related to prior year tax positions, including recorded in acquisition accounting | 2,875 |  |  | 2,992 |
Decrease related to prior year tax positions | (1,309) |  |  | (455) |
Decrease related to prior year tax positions due to lapse of applicable statute of limitation | (287) |  |  | (455) |
Increase related to current year tax positions, including recorded in acquisition accounting | 2,454 |  |  | 1,385 |
Decrease related to settlements with taxing authorities | (317) |  |  | (11,170) |
Effect of exchange rate changes | (145) |  |  | (946) |
Closing Balance at December 31 | $ | 34,300 |  |  | $ | 25,651 |
As of December 31, 2020 and 2021, the Company had unrecognized tax benefits amounting to $34,300 and $25,651, respectively, which, if recognized, would impact the effective tax rate. As of December 31, 2020 and 2021, the Company had accrued $6,369 and $2,842, respectively, in interest and $900 and $628, respectively, for penalties relating to unrecognized tax benefits. During the years ended December 31, 2019, 2020 and 2021, the Company recognized $826, $662 and $(13,851), respectively, in interest related to income taxes. In the next twelve months and for all tax years that remain open to examinations by U.S. federal and various state, local, and other U.S. taxing authorities, the Company estimates that it is reasonably possible that the total amount of its unrecognized tax benefits will vary. However, the Company does not expect significant changes within the next twelve months other than depending on the progress of tax matters or examinations with various taxing authorities, which are difficult to predict. 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 2017. 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, 2012 and January 1, 2011, respectively. The Company regularly reviews the likelihood of additional tax assessments and adjusts its unrecognized tax benefits as additional information or events require.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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