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Nokia Corporation Message Board

  • kalv777 kalv777 Jan 30, 2013 5:01 PM Flag

    Nokia suspected of flouting transfer pricing rules too India tax news

    Chennai, Jan 30:

    The Income-Tax Department believes that besides income-tax violations, Nokia India may have flouted transfer pricing norms.

    The total tax implication for the Finnish mobile handset manufacturer could be over Rs 10,000 crore, said IT officials, speaking on condition of anonymity.

    The Department’s investigation team in Chennai has submitted a 150-page interim report on possible tax violation by Nokia to its headquarters in Delhi. As part of the initial investigation into tax deduction, officials have also found that Nokia may have violated transfer pricing norms. The Indian subsidiary transferred profits to its headquarters. Due to the violation, this will now be reversed and considered as income, which would be around Rs 30,000 crore. On this amount, there will be a 30 per cent tax, which works out to Rs 9,000 crore, he said.

    According to the Department, it had been found that in the last six years Nokia India had been downloading software from its parent company in Finland to manufacture mobile devices worth Rs 30,000 crore at the Sriperumbudur plant. Royalty is paid for the software downloaded. This, in turn, attracts a 10 per cent TDS (tax deduction at source) amounting to Rs 3,000 crore. Nokia, the official said, had failed to do this and pay to the Government. “We will get the TDS amount of Rs 3,000 crore from Nokia before March end,” he said. Officials in Delhi will now issue an order on the amount, including penalty if any, payable by Nokia, to the Department, the official said.

    The Assessment Officer in Delhi will decide on the penalty on the TDS amount. Nokia can appeal against the order.

    A Nokia spokesperson said, “Nokia is fully cooperating with the Indian tax authorities. We are duly responding to all queries raised by them and extending our full support in completing the investigation… We always observe applicable laws and rulings in the countries where we operate. Since we arrived in India 17 years ago, we have honoured all local laws and paid all taxes legally due.”

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    • Greedy Indian found out that NOK was closing down shop in India and moving to Vietnam. Hit em' hard. Damn Indians.

    • I found this article somewhere printed on the 16th of this month. Obviously not much to worry about if it's been more than 10 days and no one has made a big deal about it.

    • Nokia has a lot of experience dealing with the Indian tax courts...

      Google "India-Finland Double Taxation Avoidance Agreement"

      Thiruvananthapuram, Oct. 1:

      A recent ruling by the Delhi High Court on taxability of payment for software supplied along with hardware is a huge relief for the software industry.

      GyanMagnus Associates (GMA), a corporate law house based in Kochi, says this is especially true considering the ‘wafer-thin’ margins on which the industry operates.

      The issue is pending before the Supreme Court and finality may be reached only once the matter is decided there, says Sherry Oommen, founder and senior partner of GMA.

      The High Court ruled in a case of Nokia Networks that payment for software would not qualify as ‘royalty’ under the India-Finland Double Taxation Avoidance Agreement (DTAA).

      Nokia had entered into agreement for supply of GSM equipment with a few Indian cellular operators.

      The GSM equipment manufactured in Finland was sold from outside India on a principal to principal basis, under independent buyer-seller arrangements.

      Sherry Oommen said that ‘royalty’ was hitherto defined to mean consideration for the transfer of all or any rights in respect of any copyright.

      The definition was amended by the Finance Act retrospectively with effect from April 1, 1976, irrespective of the medium through which such right is transferred.

      Applying the beneficial provisions of the DTAA, the assessee claimed that the income was not chargeable to tax in India.

      But revenue authorities were of the view that post-amendment to Finance Act, related payments would require deduction of taxes at source.

      The court in turn ruled that an assessee could choose to be governed either by the domestic tax provisions or related tax treaty, depending on which is more beneficial.

      Thus Nokia could choose to be governed by either the provisions of the Act or the India-Finland DTAA. The court also laid down a key principle that the amendments effected in the Act cannot be read into the DTAA.

    • worst_investor_of_all_time worst_investor_of_all_time Jan 31, 2013 12:44 AM Flag

      This is a non-event. Whatever they owe it will be paid off. Whatever they owe is not gonna affect their cash reserves in any meaningful way - especially since they'll be cash flow positive from here on out.

      Kav - you sure have been the bearer of bad news since you got here. All passive aggressive and such. You're at least 2 IQ points higher than the average basher and that's something.

      Sentiment: Strong Buy

    • Shutting down the plant in India, Nok price should go up as India has become a liability.

    • thermonuke Jan 30, 2013 7:45 PM Flag

      "According to the Department, it had been found that in the last six years Nokia India had been downloading software from its parent company in Finland to manufacture mobile devices worth Rs 30,000 crore at the Sriperumbudur plant."

      So because Nokia e-mailed specifications instead of ground mail, India is entitled to this fee? When I am wearing my sales hat, I have provided contact information to vendors in India. I must call them back and advise if they put me on any revenue generating distribution lists that USA will be needing a 10% royalty on that whole revenue stream. We better be very, very careful!

      SHUT. IT. DOWN.

      Mr. Elop your have our support, I am ready to buy more calls on the drop.

    • 3000 crore is equivalent to $ 600 Million US Dollars....i would suspect that may be one reason for the non payment of divy's...having said that this is a common theme when dealing w/copmplex tax codes and at worst a deal for probably half that or less will be reached.....10 cent a share hit which is about what the stock dipped big deal...

      Sentiment: Strong Buy

      • 1 Reply to stillpersuing
      • What I don't understand is where were they the last 17 years. I think that is what nok is saying that they have been paying taxes the same way for the last 17 years. I could be wrong. I think India is making a big mistake, imo. Nok has been their biggest partner and benefactor for so many years. They try to make it hard for nok to do business and nok will leave them behind. They will be depriving their own poor people to pocket a few millions in the hands of the few corrupt bureacrats, a typical third world mentality that keeps them down forever. 95% poverty with 5% thieves with the wealth, imo.

    • May be it is time to move its operation to vietnam and leave the bloody indians to collect zero tax. Ungrateful idiots. NOK has been doing business the same way for 17 years and they just realized now or are their crroked shorts behind this now?

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