India seizes €688 million from Xiaomi over illegal royalty payments

By admin On May 1, 2022

Spread the love

Indian authorities have confiscated about 688 million euros in money from Xiaomi India. According to the country’s Enforcement Directorate, the company has made illegal payments to foreign entities.

Xiaomi would have classified those payments as royalties. The Enforcement Directorate, a sort of Indian equivalent of the Financial Markets Authority, calls the amounts are ‘huge’ and accuses Xiaomi that this is not about royalties at all. “Xiaomi India obtains its mobile phones and other products from manufacturers in India. Xiaomi India has not purchased any services from the three foreign entities to which it has paid royalties,” the ED said in a statement on Saturday.

Xiaomi India is said to have made these payments to three foreign entities at the direction of its parent company in China. One of them would be part of the Xiaomi group. The other two are based in the US and unrelated to Xiaomi, but the payments would nevertheless “ultimately benefit members of the Xiaomi”[bedrijven]group’. The payments have been made since 2015 and are in violation of the Foreign Exchange Management Act, Section 4, the ED continues.

Xiaomi mentions in a reaction on Twitter, the payments are “legitimate and fair” and states that they are for the “licensed technologies and intellectual property used in our Indian products.” The company is “committed to working with authorities to clear up any misunderstandings.”

As part of this investigation, the former head of Xiaomi India, Manu Kumar Jain, has also been questioned by the ED. He is currently head of Xiaomi in Dubai. The ED also wanted information on “foreign financing, share ownership and financing patterns, financial statements and information from key executives who run the company,” writes Reuters.

As part of investigations into Xiaomi, the company’s Indian headquarters was also raided in December, the news agency said. Then it turned to suspicions of tax evasion. Several Chinese telephone makers had to deal with raids at the time.

According to Reuters, Chinese companies have had a harder time in India since 2020, following a conflict at the border between the two countries. Since then, India has banned more than 300 Chinese apps, including TikTok, “for security reasons.” The rules for Chinese companies in India have also since been tightened.