Sources enforcement for Xiaomi’s India branch is currently in litigation. The Chinese company is in a battle with India’s tax authorities over the legality of its royalty payments for its products. In February, the Indian government froze $478 million worth of deposits held by Xiaomi in local bank accounts, a move the firm says it believes will harm its business. It says its Indian branch is “firmly standing on its position that these royalty payments are legal.” However, a decision by the court has yet to be made.
China tax authority froze $478 million of Xiaomi funds in February
Chinese smartphone manufacturer Xiaomi, which became the market leader in India in 2017, was embroiled in another legal battle as the government blocked $478 million of its funds. This block is the result of an investigation into allegations that the company paid foreign companies illegal royalties.
Xiaomi has disputed the charges that it paid certain businesses illegal royalties. The company also denies the accusation that it evaded taxes. It has also challenged the federal crime fighting agency’s bank account seizure.
According to the Income Tax Department, Xiaomi’s deposits of $478 million were placed under a lien. However, the company has successfully challenged the block. In a court filing, the company claims that the Income Tax department’s action was in violation of a legislative clause that allows officials to preserve revenue interests.
Xiaomi’s shares of the Indian smartphone market quadrupled from 2016 to 2017, Counterpoint Research reported. That increase was partly due to the company’s inflated purchase of smartphones at Indian contract manufacturers.
Indian tax officials freeze $478 million worth of deposits lying in local bank accounts of Xiaomi Corp
In February, India’s Income Tax Department (I-T) blocked $478 million worth of deposits lying in local bank accounts of Chinese smartphone maker Xiaomi Corp as part of an investigation into alleged tax evasion. It was the latest move in an ongoing probe into Chinese investment in India. The company had been under investigation since December.
According to a statement by the I-T department, the money was frozen under a legal provision designed to protect the revenue interests of the government. But the agency declined to comment on the specifics of the case.
On the other hand, Xiaomi said it was being targeted because it was a Chinese company. This is not the first time that Chinese companies have been caught evading taxes. A similar case was brought against Huawei Telecommunications India, which was forced to pay a hefty Rs750 crore in fines and reduce its taxable income in the country.
Xiaomi India stands by its “position on the legality of the royalty payments”
A new crop of Chinese firms are trying to get a piece of the Indian pie. As a result, the country is tightening its investment rules and making it a bit more difficult to do business here. There are two reasons for this, the first is a fear of Chinese hackers and the second is the government’s desire to protect its citizens from Chinese aggression. Despite this tumultuous backdrop, Xiaomi’s India unit is still making headlines. Its flagship product, the Redmi Note, is now available in more than 100 countries, and the company has signed lucrative deals with a number of other mobile phone manufacturers. But the competition is stiff, and there is not much room for improvement. Nevertheless, the company has managed to hold a 21% share of the market – albeit with the help of a number of foreign players.
Several Chinese companies have been in the news for the wrong reasons. For instance, in recent weeks, Chinese telco giant China Mobile has thrown its weight around by launching a slew of high-profile advertisements in the US, and its subsidiary YOOQI has been caught in a sting operation by the FBI.
Court yet to pronounce a decision on the case
Chinese smartphone maker Xiaomi is seeking to challenge India’s financial crime fighting agency’s block on $666 million in funds it had held. The Enforcement Directorate had seized bank assets of its Indian subsidiary, and accused the company of illegally remitting funds to three other foreign entities. But the company is still waiting for a court decision to be pronounced. Although a written order has been issued, it is not yet public.
Xiaomi’s former India head has been questioned as part of the investigation. The company has also been accused of selling smartphones at lower prices and evading corporate income taxes. However, it has denied any wrongdoing. It is still to be determined whether or not the company will be allowed to continue operating in India.