Indian tax officials froze $478 million worth of deposits lying in local bank accounts of China’s Xiaomi Corp in February as part of an investigation into alleged tax evasion. The fund freeze by tax authorities, being reported for the first time by Reuters, comes on top of another legal tussle Chinese smartphone giant Xiaomi faces.
Two sources with direct knowledge said the amount blocked by tax inspectors was a fallout of the December raids.
The Directorate says Xiaomi illegally made foreign remittances to certain entities “in the guise of” royalties even though it did not avail any service from them, an allegation the company denies. The Indian court has put on hold the Directorate’s decision until May 23 on Xiaomi’s appeal.
India’s Income Tax Department “put under lien” $478 million of its deposits by an order dated Feb. 18, 2022, Xiaomi stated in its filing.
Chinese companies have struggled to do business in India since 2020, when a border clash occurred between the two nations. India has cited security concerns in banning more than 300 Chinese apps since then, including popular ones, such as TikTok, and tightened norms for Chinese companies investing in India.
Xiaomi recently hit the headlines with accusations that its executives faced intimidation from Indian Directorate’s officials, drawing public rebuttals from the agency and words of support from the Chinese government.
Xiaomi saw its share of the Indian smartphone market quadruple from just 6% in 2016 to 24% last year, making it the market leader, according to Counterpoint Research.
-Reuters