Indian Ministry of Finance Claims $88 Million in Tax Recovery From Xiaomi

In a statement issued on Wednesday, the Indian Ministry of Finance said it had sent three cause notices to Xiaomi Technology India Pvt. to recover 6.53 billion rupees ($88 million) in taxes from the company.

The ministry stated that Xiaomi India remitted royalties and license fees to Qualcomm USA and Beijing Xiaomi Mobile Software Co., Ltd, which were not included in the transaction value of its imports. The statement also said Xiaomi and its contract manufacturers failed to include the royalties of imported Mi mobile phones and their components in the assessable value of the products.

Regarding the matter, Xiaomi responded on Wednesday that the Indian authorities requested Xiaomi to pay back the import tax related to royalties from April 1, 2017 to June 30, 2020, which therefore has nothing to do with Xiaomi‘s recent business operations, and that the official statement is not the final result.

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In addition, Xiaomi believes that the root of this tax issue is disagreement among the parties on the determination of the price of imported goods. Whether royalties, including patent license fees, should be covered in the price of imported goods is a complicated technical problem in all countries. Xiaomi said that it would continue to communicate with relevant Indian authorities on this issue.