Chinese smartphone giant Xiaomi told by India to pay US$88 million in import taxes

South China Morning Post

Posted at Jan 07 2022 07:13 AM

The Indian government has demanded Xiaomi pay import taxes it allegedly owes, in the Chinese smartphone maker's latest run-in with authorities in the South Asian nation.

Xiaomi confirmed on Thursday that its local unit has been asked by India's finance ministry to pay 6.53 billion rupees (US$87.8 million) in import taxes. The company, however, insisted that it operates legally worldwide.

In a statement, Xiaomi said it has yet to agree with Indian authorities on the past-due amount, and communications are still ongoing.

It added that the issue was caused by "different opinions on the price determination of imported goods", such as whether patent license fees and other royalties should be included in the price of imported products.

According to an investigation by India's Directorate of Revenue Intelligence, Xiaomi India paid royalties and license fees to Qualcomm USA and Beijing Xiaomi Mobile Software Co Ltd, but did not add them to the total transaction value of its imports, Reuters reported.

The Beijing-based gadget manufacturer said that the royalties in question relate to transactions made between April 1, 2017 and June 30, 2020, which had nothing to do with Xiaomi's current business in India.

Xiaomi's most probable next step is to find local lawyers and accounting firms to negotiate with authorities on its behalf, Ding Jihua, an expert with the National Corporate Compliance Committee of the China Trade Promotion Council, said on Thursday during a webinar.

"I don't think the tax problem in India would have an impact on Xiaomi's position in global and Indian markets," Ding said.

However, Ding added that it could not be ruled out that the tax saga in India was driven by "political intention", and global companies like Xiaomi should pay more attention to local tax compliance regimes, as governments around the world actively expand their tax pools amid budget constraints and financial pressures.

This is not the first time that Xiaomi's India business has run afoul of local regulations.

The Mi Browser Pro, which comes pre-installed on Xiaomi smartphones, was added in August 2020 to a list of Chinese apps banned by the Indian Ministry of Information Technology amid the country's heightened political tensions with China.

Despite the controversy, Xiaomi remained the top smartphone brand in India in the third quarter of last year with a 23.4 per cent market share, beating South Korea's Samsung, with 16.9 per cent share, and Chinese rival Vivo, with 16.4 per cent share, according to research firm IDC.

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