Income Taxes

3 Months Ended

Mar. 29, 2020

Benefit/provision for income taxes:



	For the three months ended
	March 29, 2020		March 31, 2019
Tax expense (benefit)	2		(9	)
Effective tax rate	20.0	%	31.0	%

Our effective tax rate reflects the impact of tax incentives, non-deductible expenses, change in valuation allowance, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate and the mix of income and losses in various jurisdictions. Our effective tax rate for the first three months of 2020 was an expense of 20.0% on a pre-tax loss compared with a benefit of 31.0% on a pre-tax loss for the first three months of 2019. The movements in our effective tax rate relates mainly to the net effect of (1) the decrease in the valuation allowance when compared to the same period in 2019 as there were no Netherlands related interest expense that was impacted by the interest limitation rules ($13 million), (2) offset by the increase in non deductible goodwill ($10 million), both linked to the divestiture of the VAS business. In addition, the taxable foreign exchange rate gain is higher ($10 million) in the first three months of 2020 compared to the first three months of 2019.

The Company benefits from income tax incentives in certain jurisdictions which provide that we pay reduced income taxes in those jurisdictions for a fixed period of time that varies depending on the jurisdiction. The predominant income tax holiday is expected to expire at the end of 2026. The impact of this tax holiday decreased foreign taxes by $3 million and $2 million for the first quarter of 2020 and the first quarter of 2019, respectively. The benefit of this tax holiday on net income per share (diluted) was $0.01 for the first quarter of 2020 and $0.01 for the first quarter of 2019.