Chinese smartphone maker Xiaomi said on Wednesday that the tax issue between its Indian subsidiary and the Indian tax authorities was caused by the disagreement on the methodology to determine the price for imported goods, which came after the Indian Ministry of Finance fined Xiaomi RS.653 crore ($88 million) for evasion of customs duty.
Xiaomi said in a statement sent to the Global Times on Wednesday that the Indian authorities asked Xiaomi to pay back the import taxes on the royalty and license fees from April 1, 2017 to June 30, 2020, which are not related to Xiaomi’s recent business, adding that the official statement from the Indian authorities is not the final decision.
According to a statement by the Indian Ministry of Finance on Wednesday, Indian tax authorities have found Xiaomi India was evading customs duties by undervaluation after launching an investigation, saying the royalty and license fees paid by Xiaomi India to Qualcomm USA and to Beijing Xiaomi Mobile Software were not added in the transaction value of goods imported by Xiaomi India and its contract manufactures.
Moreover, the statement also said that Xiaomi India and its contract manufactures did not include the royalty and license fees in the transaction value for the sale of MI brand mobile phones which were either imported by Xiaomi India or assembled locally by importing parts and components.
Xiaomi noted that the question of whether royalty and license fee should be included in the price of imported goods is a complex and technical challenge across the world, stressing that the tax issue caused this time is due to the disagreement of the determination on the price of imported goods.
Xiaomi said it will continue to communicate with the responsible Indian authorities, adding that the company always complies with the relevant laws and regulations of the places where it operates.
Indian tax authorities launched a broad investigation of Chinese companies operating in India on tax and income issues in December last year, including Chinese mobile companies Oppo, Xiaomi and OnePlus.
In this photo taken on August 20, 2019, a salesman speaks with a customer after he purchased a new smartphone made by Xiaomi at a Mi store in Gurgaon, India. Photo: VCG
