India’s Income Tax Department has slapped a lien on some $478 million of Xiaomi funds held in Indian bank accounts, according to two sources and a court filing. This comes soon after the Chinese smartphone company was hit with allegations by a separate regulatory agency that the company illegally remitted funds out of India, freezing another $725 million of its money.
Sources say the seizure is the result of information obtained from documents from a December, 2021 raid by tax authorities over suspected tax evasion. That investigation alleges Xiaomi inflated the prices it paid for smartphones from its contract manufactures to reduce taxable profits.
Xiaomi mentioned the income tax authority freeze in a May 4 court filing in India’s Karnataka state, where the company is battling a separate agency, the Enforcement Directorate, which alleges Xiaomi illegally remitted money outside India “in the guise of” royalties.
Xiaomi states in its court document that the company “has cooperated in each of these investigations and provided all requisite information.”
Chinese companies have struggled to do business in India since 2020 following a border clash between the two nations. India has banned more than 300 Chinese apps since, citing national security concerned, and tightened scrutiny of Chinese companies in India.
Xiaomi’s share of the Indian smartphone market quadrupled from just 6% in 2016 to 24% in 2021, making it the market leader, according to Counterpoint Research.
- Reuters, with editing by Neal McGrath