Assets belonging to Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) in India have been frozen by the country’s government as the Finnish smartphone maker continues to fight allegations that it did not pay its taxes in the country correctly. The freezing of Nokia assets could complicate the sale of the firm’s handset business to Microsoft Corporation (NASDAQ:MSFT). One of the assets frozen by the government of India is a large factory due to be transferred as part of that deal.


The news, which was originally reported by The Wall Street Journal earlier today, is the latest move in a war the Indian government is choosing to fight with foreign corporations. The government alleges that companies like Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) operate in India and sell their products there, but do not pay the right amount of taxes in the country.

Nokia tax in India

The government of India is claiming that Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) owes them 39.97 billion rupees, or $635.1 million. The asset freeze is being used to ensure that Nokia can meet its obligations. The Indian Income Tax Department is responsible for the freeze, but it has not been able to get all it wanted. Last Friday, a Delhi High Court unfroze bank accounts belonging to Nokia.

India has been clamping down on foreign companies who are not paying the taxes it levies in recent months. Vodafone Group plc (NASDAQ:VOD) (LON:VOD) was the most famous target of the campaign thus far. The company was charged $2 billion on an acquisition of an Indian firm.

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) Spokesperson Brett Young told the WSJ: “Nokia has sufficient assets in India to meet its tax obligations, details of which will be shared with the tax authorities to allay any concerns they may have.” The paper also cites the company’s promise that the asset freeze will not interfere with the Microsoft Corporation (NASDAQ:MSFT) acquisition of the Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) handset business.

Nokia Microsoft deal

The freezing of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) assets in India is not a massive roadblock to the Microsoft Corporation (NASDAQ:MSFT) deal, but it will complicate the matter. Microsoft does not want to pay Nokia’s tax bill, and it doesn’t want to buy the same factory twice.

This is not a big enough development to bring an end to the acquisition, but it might cause it to drag on for longer than expected, and result in Microsoft Corporation (NASDAQ:MSFT) entering the handset business later than anticipated.