Xiaomi was again investigated by the Indian authorities.
On May 2, in response to the seizure of assets by the Indian government department, the International Finance News reporter learned from Xiaomi that Xiaomi India's statement said: "As a brand dedicated to India, all our operational activities strictly comply with local laws and regulations. ”
According to a document published on the website of the Enforcement Agency of the Ministry of Finance of India, the Directorate of Enforcement seized 555.127 crore (about 4.8 billion yuan) of assets from Xiaomi Technology India Private Limited (hereinafter referred to as "Xiaomi India") under the provisions of the Foreign Exchange Management Act 1999.
According to the document, Xiaomi India is a wholly owned subsidiary of the China-based Xiaomi Group, and the Rs 555.127 crore assets seized by the Indian Law Enforcement Agency are the bank accounts belonging to the company, and the Enforcement Bureau has launched an investigation into the company's illegal remittances in February this year.
"The company started operating in India in 2014 and has been sending money since 2015," said the Indian Enforcement Agency. The company has remitted the equivalent of Rs 5,551,270 crore in foreign currencies to three foreign entities, including a Xiaomi Group entity under the guise of royalties. Such a huge amount of royalties was remitted in accordance with the instructions of its Chinese parent group entity, and the amount remitted to the other two U.S. non-affiliated entities was also for the ultimate benefit of the Xiaomi Group entity. ”
The above documents also show that Xiaomi India is a mobile phone trader and distributor of the Xiaomi brand in India. Xiaomi India sources fully manufactured mobile devices and other products from manufacturers in India. Xiaomi India does not receive any services from three foreign entities that have transferred these amounts to Xiaomi India. Under the cover of various unrelated documents created between group entities, the company remitted the money abroad in the name of royalties, in violation of article 4 of the Foreign Exchange Control Act. The company also provided misleading information to banks when it remitted funds abroad.
In response to the incident, Xiaomi India said in a statement: "We have carefully studied the orders of the authorities. We believe that the royalties and bills we pay to banks are legal and authentic. These royalties paid by Xiaomi India are used for licensed technology and intellectual property rights used in our Indian version of our products. For Xiaomi India, paying such royalties is a legitimate business practice. Of course, we will work closely with the government to clarify any misunderstandings. ”
It is worth noting that in January this year, India's Ministry of Finance said in a statement that the Indian Tax Intelligence Agency had issued a notice to Xiaomi India to recover 653 million rupees (about 560 million yuan) of tax from the company.
The Tax Intelligence Bureau conducted a search of Xiaomi India's business premises and found supporting documents proving that Xiaomi India paid royalties and licensing fees to Qualcomm and Beijing Xiaomi Mobile Software Co., Ltd. in accordance with its contractual obligations. In the course of the investigation, it was further found that the "royalties and licensing fees" paid by Xiaomi India to Qualcomm and Beijing Xiaomi Mobile Software Co., Ltd. of the United States did not count in the transaction value of the goods imported by Xiaomi India and its contract manufacturers. This is in violation of section 14 of India's Customs Act, 1962 and the rules of customs valuation (determination of the value of imported goods) 2007. Under the provisions of the Customs Act 1962, the Tax Intelligence Service issued three reasoning notices to Xiaomi India seeking to recover its Rs 653 crore tax for the period from 1 April 2017 to 30 June 2020.
Xiaomi said at the time that Xiaomi insisted on legal and compliant operations around the world and complied with the relevant laws and regulations of the place of operation. The root cause of this tax problem is the disagreement between the parties on the price determination of imported goods. Whether royalties, including patent royalties, should be included in the price of imported goods is a complex technical dilemma in all countries.
In addition, according to a number of previous media reports, the Indian Enforcement Agency in February investigated the existing business structure between Xiaomi India, its foundry manufacturer and its parent company in China under the Foreign Exchange Management Law, and issued a notice to a former Xiaomi India executive requesting various corporate documents. This information includes details of foreign funding, shareholding and financing models, financial statements, and information on key executives operating the business. Regarding the investigation, a Xiaomi spokesperson said that Xiaomi complies with all regulations in India, claiming: "We are cooperating with the ongoing investigation by the authorities to ensure that it can have all the necessary information." ”
Reporter: Cai Shumin
Edit: Majack
Editor-in-Charge: BiDandan