Finland and India reached a deal under the Mutual Agreement Procedure regarding Nokia’s unpaid taxes and the frozen Chennai plant in India. The tax dispute between Nokia and India is probably one of the most famous in the tech sector in India.
It all started in 2006 when Nokia India allegedly violated India’s laws by paying royalties for software that was installed in factories in India to its parent company in Finland. According to India-Finland tax treaty, such transaction are taxed at a 10% tax rate. Nokia disputed the claim that such transaction goes under the tax treaty, because software taken from the parent was embedded in the phone and an inherent part of its hardware, reports Economic Times.
At the end, with interest, the debt skyrocketed at 1.23 billion euros (INR 10,000 crore) . The debt was settled at 196 million euros (INR 1,600 crore), which Nokia payed in March this year. Nokia’s CEO Rajeev Suri told ET that an announcement and more details about this tax deal will be provided with the Q1 financial report that Nokia plans to publish on 26th April 2018. Because of the tax dispute, the Chennai plant wasn’t a part of the acquisition of Nokia’s Devices and Services business to Microsoft in 2013/2014.
This deal now clears the way for the sale of the Chennai plant to interested parties. The most obvious buyer seems to be Rising Star Mobile India, owned by Foxconn that already purchased some machinery from the factory, with consent of Indian authorities. HMD Global already announced ambitions to expand Nokia phone manufacturing operations in India, via its partner Foxconn, and to start making components. Foxconn already started PCB assembly in India using some of former Nokia machinery they purchased from the (closed) factories.
It’s good to see this story concluded in a positive matter. Nokia payed the tax demand and will probably (partially) compensate the payment with the sales of the Chennai plant.