Nokia has been demanded by Indian tax authorities to pay about 2.09 billion rupees, or nearly $38 million for allegedly seeking exemption given on software exports.
Nokia Claiming Tax Exemptions:
The Finnish handset maker Nokia has been allegedly claiming tax exemptions for exporting software developed in India between April 1, 2007 and March 31, 2012.
According to The Wall Street Journal, the new demand for service tax adds to the woes of Nokia’s problems in India. Earlier the tax authorities alleged that Nokia India had made royalty payments to the parent company for which it did not make the mandated 10 percent tax deduction at source. The tax authorities demanded the local unit to pay 20.8 billion rupees of income tax and other fees. However the case is yet to be resolved, as the handset maker has contested the tax officials’ claims.
During the past few months, Indian tax authorities have been slapping tax claims on prominent global players such as Vodafone Group Plc (NASDAQ:VOD) (LON:VOD), Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B), Mondelez International Inc (NASDAQ:MDLZ)’s Cadbury Unit besides several other auto makers for their alleged under pricing transactions ranging from share transfers to sale of vehicles.
It has been reported that recently about 146 multi-national companies have sought advance ruling under Advance Pricing Agreements (APA) mechanism. The APA mechanism is meant to address the appropriate transfer pricing methodology for a set of future international transactions.
Latest Issue Relating To Nokia India:
The latest issue relating to Nokia India hovers around the 12 percent service tax that Indian tax authorities levy on software which are developed and used locally. However no such tax is levied if the software is exported.
The Indian tax officials alleged that Nokia India Pvt Ltd claimed about 1.83 billion rupees as tax exemption for exporting software developed in India besides allegedly under-reporting some taxable service revenue.
Nokia India’s spokesperson remarked that the company’s policies have been validated by both the Indian and Finnish authorities ever since the handset maker started its operations in India during mid-1990s.