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Updated: Indian Tax Department Raids Nokia India’s Offices & Factory

Update: Nokia Corporation has sent letters of complaint to Indian tax authorities saying that tax officials in January raided its manufacturing facility in Chennai without giving a reason suggesting that this was illegal, reports Foxbusiness. Nokia also claimed that the raids were not run in accordance to Indian laws and International laws and found the actions to be excessive, unacceptable and inconsistent with the domestic laws.

Nokia also claims that its transfer pricing policies are in accordance to the Indian and Finnish laws, as indicated by the report.

Update (January 9, 2013): According to a report by The Hindu, the Income Tax department has asked Nokia India for a clarification on non-payment of ‘tax deducted at source’ (TDS) on software supplies and on change in accounting model. The IT Department in an official release said that a survey was carried out at the Nokia India factory, Sriperumbudur, and at the company’s Corporate office premises in Gurgaon, under Section 133A of the Income-tax Act, 1961, in which ‘certain issues were identified and some important evidences that had a bearing on the tax implications of the company were impounded’, as per the report. It points out that Nokia India was sending its parent company Nokia OYJ, payments for software supplies since 2005, which attracted TDS as per the IT Act. However, Nokia did not deduct any TDS on these payments.

Indian Income Tax officials conducted tax raids on Nokia India’s Sriperumbudur (TamilNadu) plant and offices in Chennai, according to a report by
The Times of India. The report quotes an IT official who chose to stay anonymous, saying that authorities suspect tax evasion to the tune of Rs 3,000 crore by the Finland headquartered mobile handset maker, and that the company has not paid tax in India.

Another report by The Hindu BusinessLine mentions that the survey went on for 24 hours and that there was a prima facie case against Nokia India on income-tax default to the tune of Rs 2,500 crore to Rs 3,000 crore. It adds that the company’s officials have been instructed to report to the IT department office on January 16 with regards to the matter.

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Noka confirmed the raid and Nokia spokesman Brett Young told The Wall Street Journal that no reason was given by Indian (tax) authorities and that Nokia was fully cooperating to ensure they get the necessary information to help in their inquiry. The WSJ report also cites  a person familiar with Nokia saying that the raid was most likely related to the allocation of taxes between India and Finland. Nokia’s stock price dipped by more than 6% to 3.08 euros in Helsinki after news of the raid.

This follows news reports of the IT department sending a reminder to telecom operator, Vodafone, to pay taxes on the capital gains from its $11.2 billion deal in Caymen Islands with Hutchison Telecommunications International Limited (HTIL) for acquiring a controlling stake in Vodafone India. Note that the Indian Government had retrospectively amended tax laws to tax offshore indirect transactions with Indian assets. Vodafone, however, continues to believe that no tax is due from its end.

 (Apurva Chaudhary and Anupam Saxena Contributed to this report)

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