Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is planning to make a proposal to the Indian government this week to settle its tax dispute. Sven Grundberg and Juhana Rossi of The Wall Street Journal report that the company will suggest that it set aside a chunk of cold, hard cash in exchange for the Indian government releasing its assets there. This is said to be a temporary solution to the ongoing tax dispute Nokia is having in India.

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Nokia goes to court in India

Nokia is scheduled to be in High Court in Delhi tomorrow, according to The WSJ’s sources. The hearing is about the company’s request for the court to unfreeze the immovable assets it holds in India. That includes its biggest handset facility, which is located in southern India in Chennai.

Indian officials from the Income Tax Department froze Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s assets in September. They wanted to make sure the struggling Finnish company would be able to pay the hefty tax bill it owes, which could go as high as $1 billion. Nokia has a deadline of Dec. 12 to get those assets released so that it can transfer them to Microsoft Corporation (NASDAQ:MSFT). The handset facility is included in the $7 billion bid Microsoft made for Nokia’s handset business in September. Most of the other hurdles have already been crossed as regulators have cleared the way for the deal.

Nokia makes an offer to India

Under the terms of the proposal Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is expected to make to Indian officials, the company will deposit a cash security of about €270 million to the tax authority in India. It has already deposited €85 million with the tax department. Nokia said it will also try to put that tax issue to rest later, according to The WSJ’s sources.

If Nokia can’t get its Indian assets unfrozen by the Dec. 12 deadline, then that factory will not transfer to Microsoft Corporation (NASDAQ:MSFT). As a result, Nokia will have to remain in the handset making business as an outside contractor for Microsoft until the tax issue is fixed.

Nokia accused of avoiding taxes

Officials in India have so part billed Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) €250 million, most of which is in connection with taxes they say Nokia wrongfully avoided. They said the company claimed an exemption on software exports. Officials will likely still have more claims to put forward.

Last week the Indian Income Tax department rejected Nokia’s offer to pay $361 million in tax liabilities, saying that the company has more than $1 billion in tax liabilities.