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Income taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Income tax expense (benefit) for the years ended December 31, 2020, 2021 and 2022 is allocated as follows:
Year ended December 31,
202020212022
Income from continuing operations$92,201 $113,681 $111,832 
Other comprehensive income:
Cash flow hedges(3,327)5,265 (4,947)
Retirement benefits(894)3,859 690 
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,
202020212022
Domestic (U.S.)$122,497 $126,107 $44,903 
Foreign (other than U.S.)277,980 357,022 420,333 
Income before income tax expense$400,477 $483,129 $465,236 
23. Income taxes (Continued)
Income tax expense (benefit) attributable to income from continuing operations consists of:
Year ended December 31,
202020212022
Current tax expense:
Domestic (U.S. federal)$23,668 $34,538 $17,525 
Domestic (U.S. state)10,765 5,605 4,582 
Foreign (other than U.S.)80,355 82,801 118,876 
$114,788 $122,944 $140,983 
Deferred tax expense (benefit):
Domestic (U.S. federal)$(7,329)$(6,039)$(10,481)
Domestic (U.S. state)(3,770)232 (1,910)
Foreign (other than U.S.)(11,488)(3,456)(16,760)
$(22,587)$(9,263)$(29,151)
Total income tax expense (benefit) $92,201 $113,681 $111,832 
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,
202020212022
Income before income tax expense$400,477 $483,129 $465,236 
Statutory tax rates21 %21 %21 %
Computed expected income tax expense84,100 101,457 97,700 
Increase (decrease) in income taxes resulting from:
Foreign tax rate differential15,456 10,747 13,853 
Tax benefit from tax holiday(16,063)(3,159)(797)
  True-up of prior years tax liability(3,420)7,590 2,096 
  Interest income on income tax refund— (7,780)(2,168)
Non-deductible expenses372 1,755 4,826 
Effect of change in tax rates453 1,740 (116)
Change in valuation allowance142,733 6,244 10,752 
Unrecognized tax benefits3,228 (327)1,236 
Employment related tax incentive— (3,930)(1,093)
Internal restructuring(129,688)— — 
State income taxes6,995 5,837 2,672 
Excess tax benefit on share-based compensation(7,310)(7,773)(10,418)
Others*(4,655)1,280 (6,711)
Reported income tax expense (benefit)$92,201 $113,681 $111,832 
*During the years ended December 31, 2020 and 2022, the Company recorded a tax benefit on the outside basis difference on the stock of one of its subsidiaries amounting to $8,384 and $6,881. For the year ended December 31, 2020, 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)
The effect of the Indian tax holiday on both basic and diluted earnings per share was $0.08, $0.02 and $0.00, respectively, for the years ended December 31, 2020, 2021 and 2022.
The components of the Company’s deferred tax balances as of December 31, 2021 and 2022 are as follows:
As of December 31,
20212022
Deferred tax assets
Net operating loss carryforwards$37,593 $49,810 
Accrued expenses and other liabilities70,802 72,588 
Allowance for credit losses9,000 8,441 
Property, plant and equipment, net4,079 7,474 
Lease liabilities50,091 51,913 
Share-based compensation31,147 32,777 
Intangible assets, net168,737 179,815 
Retirement benefits9,721 8,629 
Contract liabilities8,012 7,452 
Tax credit carryforwards15,724 17,199 
Others10,277 21,902 
Total deferred tax assets$415,183 $458,000 
Less: Valuation allowance(212,192)(222,655)
Total deferred tax assets, net of valuation allowance$202,991 $235,345 
Deferred tax liabilities
Intangible assets, net$6,598 $128 
Property, plant and equipment, net1,907 1,290 
Right-of use assets40,733 40,946 
Retirement benefits3,404 4,175 
Investments in foreign subsidiaries not indefinitely reinvested1,708 1,663 
Derivative instruments6,153 2,344 
Goodwill34,597 43,173 
Others5,511 10,319 
Total deferred tax liabilities$100,611 $104,038 
Net of deferred tax assets and liabilities$102,380 $131,307 
As of December 31,
Classified as20212022
Deferred tax assets non-current$106,322 $135,483 
Deferred tax liabilities non-current 3,942 4,176 
$102,380 $131,307 
23. Income taxes (Continued)
The change in the Company’s total valuation allowance for deferred tax assets as of December 31, 2020, 2021 and 2022 is as follows: 
Year ended December 31,
202020212022
Opening valuation allowance$62,628 $206,011 $212,192 
Reduction during the year(35,662)(1,206)(214)
Addition during the year179,045 7,387 10,677 
Closing valuation allowance$206,011 $212,192 $222,655 
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, 2022. 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, 2020, 2021 and 2022, the Company recognized net excess tax benefits on share-based compensation of $7,310, $7,773 and $10,418, respectively, in income tax expense attributable to continuing operations.
As of December 31, 2022, the Company’s deferred tax assets related to net operating loss carry forwards of $186,202 amounted to $45,056 (excluding state net operating losses). Net operating losses of subsidiaries in the United Kingdom, Israel, Hong Kong, the Netherlands, the United States and Luxembourg (for 2016 and prior years) amounted to $89,307 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:
EuropeOthers
Year ending December 31,
2023$146 $— 
20240 1,938 
2025172 1,645 
20261,450 — 
2027613 — 
2028929 83 
2029— 161 
2032— 207 
203418,820 — 
20357,357 — 
203663,374 — 
$92,861 $4,034 

In the table above, “Europe” includes net operating losses of subsidiaries in Slovakia, Latvia, Luxembourg and Poland, while “Others” includes net operating losses of subsidiaries in Japan and the Philippines.
As of December 31, 2022, the Company had additional deferred tax assets for U.S. state and local tax loss carry forwards amounting to $4,754 with varying expiration periods, most of which can be carried forward for an indefinite period.
As of December 31, 2022, the Company had a total foreign tax credit carry forward of $17,199 for subsidiaries in the United States which will expire as set forth in the table below:
Year ending December 31,Amount
20286,378 
20293,105 
20302,665 
20313,497 
20321,554 
$17,199 

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 $773,314 as of December 31, 2022. 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, 2022, $637,654 of the Company’s $646,765 in cash and cash equivalents was held by the Company’s foreign (non-Bermuda) subsidiaries. $3,764 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 $9,512 of retained earnings. $633,890 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 2021 and 2022:
20212022
Opening Balance at January 1$34,300 $25,651 
Increase related to prior year tax positions, including recorded in acquisition accounting2,992 2,869 
Decrease related to prior year tax positions(455)(1,802)
Decrease related to prior year tax positions due to lapse of applicable statute of limitation(455)(1,313)
Increase related to current year tax positions, including recorded in acquisition accounting1,385 1,426 
Decrease related to settlements with taxing authorities(11,170)(4)
Effect of exchange rate changes(946)(1,397)
Closing Balance at December 31$25,651 $25,430 
As of December 31, 2021 and 2022, the Company had unrecognized tax benefits amounting to $25,651 and $25,430, respectively, which, if recognized, would affect the effective tax rate.
As of December 31, 2021 and 2022, the Company had accrued $2,842 and $2,871, respectively, in interest and $628 and $374, respectively, for penalties relating to income taxes.
During the years ended December 31, 2020, 2021 and 2022, the Company recognized $662, $(13,851) and $(2,583), respectively, in interest related to income taxes.
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 for existing tax positions will vary. However, the Company does not expect significant changes within the next twelve months other than adjustments 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 2018. 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, 2014 and January 1, 2012, respectively. The Company regularly reviews the likelihood of additional tax assessments and adjusts its unrecognized tax benefits as additional information or events require.