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Nokia Offers To Pay Indian Tax Bill To Unfreeze Assets

by Mary Swire,, Hong Kong

12 December 2013

Nokia has offered to pay a INR225bn (USD3.69m) deposit to the Indian tax authorities, in an effort to free up its assets and complete a key deal with Microsoft.

The mobile phone manufacturer's Indian bank assets and accounts were frozen earlier this year after it was asked to pay a bill for back taxes relating to the period between 2006-07 and 2011-12. The Government says that payments made for software used in devices produced in India, and supplied by Nokia's parent companies, are classifiable as royalties, and therefore liable to a 10 percent tax.

In November, the company warned that if the freeze continued, its factory in Chennai could not transfer to Microsoft under its planned takeover deal. The takeover deadline is set for December 12.

Nokia has asked the Delhi High Court to release the assets, and it will hear the case today. A company spokesperson told India's Economic Times that its petition to the Delhi High Court stipulates that "the entire proceeds of the sale of the Chennai factory to Microsoft will be deposited into the escrow amount with a minimum guarantee of INR225bn."

Nokia has already committed to paying INR7bn to the Income Tax Department next year. However, the Economic Times claims that the authorities have now re-calculated the amount owed by Nokia. This could result in two separate demands, totalling INR45.6bn and INR60bn respectively, being sent to Nokia Corporation and Nokia India.

According to the company's spokesperson, it has yet to be served with "any official claim" in this case, and its "main focus" remains securing the release of its assets.

TAGS: compliance | tax | tax compliance | India | tax avoidance | tax incentives | royalties | tax authority | tax planning | telecoms | Tax | Tax Evasion

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