12. Income Taxes

The Company recorded an income tax expense of $47.3 million, benefit of $84.9 million, and expense of $60.8 million for the years ended December 31, 2025, 2024, and 2023, respectively. The income tax benefit for the year ended December 31, 2024 included the tax impacts of changes the Company initiated to its corporate entity structure during the fourth quarter of 2024. This reorganization resulted in the Company recognizing a large benefit from the establishment of a deferred tax asset and the release of a valuation allowance primarily related to net operating losses.

The applicable statutory income tax rate in the Cayman Islands was zero for Herbalife Ltd. for the years being reported. For purposes of the reconciliation between the provision for income taxes at the statutory rate and the provision for income taxes at the effective tax rate, the 21% U.S. tax rate (the tax rate at which the majority of the Company’s operations are taxed) is applied for the years reported. The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis beginning with the year ended December 31, 2025. The following table presents the required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to the Company’s actual global effective amount and rate for the year ended December 31, 2025:

Tax loss and credit carryforwards of certain foreign subsidiaries for 2025 and 2024 were $234.8 million and $225.6 million, respectively. If unused, tax loss and credit carryforwards of certain foreign subsidiaries of $221.0 million will expire between 2026 and 2041 and $13.8 million can be carried forward indefinitely. U.S. foreign tax credit carryforwards for 2025 and 2024 were $132.9 million and $156.0 million, respectively, which are included in Domestic tax credit carryforwards in the table above. If unused, U.S. foreign tax credit carryforwards will expire between 2026 and 2035. U.S. research and development tax credit carryforwards for 2025 and 2024 were $22.4 million and $5.3 million, respectively. If unused, U.S. research and development tax credit carryforwards begin expiring in 2040. The deferred interest expense can be carried forward indefinitely. U.S. state tax loss and credit carryforwards for 2025 were $5.0 million. If unused, certain U.S. state tax loss carryforwards will expire between 2033 and 2045, while the remaining can be carried forward indefinitely.

The Company recognizes valuation allowances on deferred income tax assets reported if, based on the weight of the evidence, it is more likely than not that some or all of the deferred income tax assets will not be realized. As of December 31, 2025 and 2024, the Company held valuation allowances against net deferred income tax assets of certain subsidiaries, primarily related to tax loss carryforwards and U.S. foreign tax credits, in the amount of $336.8 million and $404.2 million, respectively. The net decrease in the Company’s valuation allowance during 2025 of $67.4 million was primarily attributable to the release of the remaining balance of the valuation allowance related to deferred tax assets in certain of its European subsidiaries. The net increase in the Company’s valuation allowance during 2024 of $28.7 million was primarily attributable to changes from the reorganization in that year.

Since certain of Herbalife Ltd.’s unremitted earnings have been permanently reinvested, deferred taxes were not provided on these unremitted earnings. Further, it is not practicable to determine the amount of unrecognized deferred taxes with respect to these unremitted earnings. If the Company were to remit these unremitted earnings, it would be subject to income tax on these remittances. Deferred taxes have been accrued for earnings that are not considered indefinitely reinvested. The deferred income tax liabilities on the unremitted foreign earnings as of December 31, 2025 and 2024 were $16.1 million and $11.7 million, respectively.

The amount of income taxes paid, net of refunds received by the Company during the years ended December 31, 2024 and 2023 was $132.3 million and $121.2 million, respectively. The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and has included the following table as a result of its adoption, which presents income taxes paid, net of refunds received for the year ended December 31, 2025:

As of December 31, 2025, the total amount of unrecognized tax benefits, including related interest and penalties was $45.7 million. If the total amount of unrecognized tax benefits was recognized, $33.2 million of unrecognized tax benefits, $8.2 million of interest, and $1.3 million of penalties would impact the effective tax rate. As of December 31, 2024, the total amount of unrecognized tax benefits, including related interest and penalties was $51.3 million. If the total amount of unrecognized tax benefits was recognized, $36.5 million of unrecognized tax benefits, $10.1 million of interest, and $1.3 million of penalties would impact the effective tax rate.

The Company accounts for the interest and penalties generated by tax contingencies as a component of income tax expense. During the year ended December 31, 2025, the Company recorded a decrease in interest and penalty expense related to uncertain tax positions of $2.1 million and $0.1 million, respectively. During the year ended December 31, 2024, the Company recorded a decrease in interest and penalty expense related to uncertain tax positions of $5.3 million and $0.8 million, respectively. During the year ended December 31, 2023, the Company recorded a decrease in interest and penalty expense related to uncertain tax positions of $4.2 million and $1.0 million, respectively. As of December 31, 2025, the total amount of interest and penalties related to unrecognized tax benefits recognized in the consolidated balance sheet was $8.2 million and $1.3 million, respectively. As of December 31, 2024, the total amount of interest and penalties related to unrecognized tax benefits recognized in the consolidated balance sheet was $10.1 million and $1.3 million, respectively. As of December 31, 2023, the total amount of interest and penalties related to unrecognized tax benefits recognized in the consolidated balance sheet was $16.0 million and $2.3 million, respectively.

The amount of income taxes the Company pays is subject to ongoing audits by taxing jurisdictions around the world. The Company’s estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company believes that it has adequately provided for these matters. However, the Company’s future results may include favorable or unfavorable adjustments to its estimates in the period the audits are resolved, which may impact the Company’s effective tax rate. As of December 31, 2025, the Company’s tax filings are generally subject to examination in major tax jurisdictions for years ending on or after December 31, 2012.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”), which in part, increases the tax deductibility of interest and research and development expenses beginning in 2025. The international provisions of the tax bill, including the minimum tax on foreign earnings, export income, and foreign tax credits, become effective in 2026. The Company recognized the effects of the enacted provisions during the third quarter of 2025, which did not have a material impact on the Company’s consolidated financial statements. Based on the Company’s preliminary analysis, the financial impact of the provisions with future effective dates is not expected to be material to its consolidated financial statements. However, the Company continues to evaluate the OBBBA and monitor additional guidance issued by regulatory authorities to assess any potential impacts on its consolidated financial statements.