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India Releases Nokia's Assets

by Mary Swire, Tax-News.com, Hong Kong

16 December 2013


Microsoft's planned takeover of Nokia took an important step this week when a New Delhi court released the mobile phone manufacturer's Indian assets.

The assets were seized by the Indian tax authorities earlier this year, in an effort to claw back taxes it says Nokia owes. The company has been asked to pay a INR20.8bn (USD364.2bn) bill for back taxes relating to the period between 2006-07 and 2011-12. The Government claims that payments made for software used in devices produced in India, and supplied by Nokia's parent companies, are classifiable as royalties. They would, therefore, be subject to tax at 10 percent.

Nokia appealed to the New Delhi High Court to unfreeze the assets in time for Microsoft's takeover deadline yesterday. It proposed that the entire proceeds of the sale of its Chennai factory to Microsoft – estimated at INR22.5bn – would be handed over to the taxman.

The Court's ruling means that Microsoft should now be able to take control of the factory, but on the condition that the suggested INR22.5bn is deposited in an escrow account as a security.

It was not all good news, however. The Court did not settle the tax dispute, and it is thought that the Government could recalculate the sum it says Nokia owes. If it does, Nokia may face a total tax liability of around USD1.1bn.

TAGS: court | compliance | tax | tax compliance | India | tax avoidance | royalties | law | tax authority | tax planning | revenue statistics | telecoms | Tax | Tax Evasion

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