v3.23.1
Taxation
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Taxation
Note 10 - Taxation
Borr Drilling Limited is a Bermuda company not required to pay taxes in Bermuda on ordinary income or capital gains under a tax exemption granted by the Minister of Finance in Bermuda until March 31, 2035. We operate through various subsidiaries, affiliates and branches in numerous countries throughout the world and are subject to tax laws, policies, treaties and regulations, as well as the interpretation or enforcement thereof, in jurisdictions in which we or any of our subsidiaries, affiliates and branches operate, were incorporated, or otherwise considered to have a tax presence. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred.
Total pre-tax loss is comprised of the following by jurisdiction:
 For the Years Ended December 31,
(In $ millions)202220212020
Bermuda(44.1)(68.1)(76.4)
Foreign(230.3)(115.2)(225.0)
Total (274.4)(183.3)(301.4)
All income tax expense is attributable to foreign jurisdictions and is comprised of the following:

 For the Years Ended December 31,
(In $ millions)202220212020
Current tax expense20.5 10.2 15.1 
Change in deferred tax(2.1)(0.5)1.1 
Total 18.4 9.7 16.2 
Our annual effective tax rate for the year ended December 31, 2022 was approximately (6.71%), on a pre-tax loss of $274.4 million. Changes in our effective tax rate from period to period are primarily attributable to changes in the profitability or loss mix
of our operations in various jurisdictions. As our operations continually change among numerous jurisdictions, and methods of taxation in these jurisdictions vary greatly, there is minimal direct correlation between the income tax provision/benefit and income/(loss) before taxes. A reconciliation of the Bermuda statutory tax rate to our effective rate is shown below:

 For the Years Ended December 31,
 202220212020
Bermuda statutory income tax rate— %— %— %
Tax rates which are different from the statutory rate(7.20)%(6.64)%(6.49)%
Adjustment attributable to prior years0.67 %1.60 %— %
Change in valuation allowance— %— %1.57 %
Adjustments to uncertain tax positions(0.18)%(0.26)%(0.45)%
Total(6.71)%(5.30)%(5.37)%
The components of the net deferred taxes are as follows:
 As of December 31,
(In $ millions)20222021
Deferred tax assets  
Net operating losses17.7 13.0 
Excess of tax basis over book basis of property, plant and equipment45.0 53.6 
Other17.9 16.0 
Deferred tax asset80.6 82.6 
Less: Valuation allowance(77.1)(81.9)
Net deferred tax assets (1)
3.5 0.7 
Deferred tax liabilities
Deferred tax liabilities(0.7)— 
Net deferred tax asset2.8 0.7 
(1) Net deferred tax assets are recognized in "Other non-current assets" in the Consolidated Balance Sheets (see Note 18 - Other Non-Current Assets).
The deferred tax assets related to our net operating losses were primarily generated in the United Kingdom ($58.0 million net operating losses at December 31, 2022) and will not expire. A tax rate change from 19% to 25% (from April 2023) was enacted in the UK during 2021. This increased the gross deferred tax asset by $19.0 million in 2021 but had a nil net impact due to an offsetting valuation allowance. We recognize a valuation allowance for deferred tax assets when it is more-likely-than-not that the benefit from the deferred tax asset will not be realized. The amount of deferred tax assets considered realizable could increase or decrease in the near-term if estimates of future taxable income change.
We conduct business globally and, as a result, we file income tax returns, or are subject to withholding taxes, in various jurisdictions. In the normal course of business we are generally subject to examination by taxation authorities throughout the world, including major jurisdictions in which we operate or used to operate, such as Egypt, The Republic of Congo, Malaysia, the Netherlands, Nigeria, Saudi Arabia, the United Kingdom, Mexico, and Tanzania.
The following is a reconciliation of the liabilities related to our uncertain tax positions:

(In $ millions)20222021
Unrecognized tax benefits, excluding interest and penalties, at January 1,6.2 6.2 
Unrecognized tax benefits, excluding interest and penalties, at December 31,6.2 6.2 
Interest and penalties5.1 4.6 
Unrecognized tax benefits, including interest and penalties, at December 31,11.3 10.8 
The liabilities summarized in the table above are presented within "Other non-current liabilities" in the Consolidated Balance Sheets.
We include, as a component of our income tax provision, potential interest and penalties related to liabilities for our unrecognized tax benefits within our global operations. Interest and penalties resulted in an income tax expense of $0.5 million, $0.4 million and $0.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2022, the liabilities related to our unrecognized tax benefits, including estimated accrued interest and penalties, totaled $11.3 million, and if recognized, would reduce our income tax provision by $11.3 million. As of December 31, 2021, the liabilities related to our unrecognized tax benefits, including estimated accrued interest and penalties, totaled $10.8 million, and if recognized, would reduce our income tax provision by $10.8 million. It is reasonably possible that our existing liabilities related to our unrecognized tax benefits may increase or decrease in the next twelve months primarily due to the progression of open audits or the expiration of statutes of limitation. While the amounts provided are an estimate and subject to revision, we are not aware of any circumstances currently that would result in a material increase to the amounts provided for the risks identified at this time.