Nokia Seeking Remedies For India Tax Problems (NYSE:NOK)

nokiaNokia’s tax issues in India are complicating its planned sale of its handset business to Microsoft. In hopes of resolving a months-long standoff with local officials, Nokia recently sent a proposal to settle its tax debts to the Delhi High Court for review. At issue is a tax dispute with Indian authorities. Microsoft has offered to pay Nokia $7.2 billion for the handset business.

The Finnish cellphone giant’s latest attempt to resolve the issue included an offer to pay almost $400 million to settle the issue. According to a person with direct knowledge of the plan, under the proposal, Nokia offered around 270 million euros, or $370 million, to Indian tax authorities as a cash deposit for them to unfreeze the local assets. Nokia previously made an 85 million euro payment to the Indian authorities, but the company is expected to fight to retrieve the deposits in the event that the tax dispute is resolved in its favor. Indian tax authorities originally demanded that Nokia pay 250 million euros to settle its outstanding tax debts.

As Nokia has tried to complete the sale of its cellphone business to Microsoft, the tax issues have caused last-minute headaches. In September, Indian officials froze the company’s assets in the country to ensure that its future tax bill would be paid. Those assets included a large manufacturing plant scheduled to be transferred to Microsoft upon completion of the deal with Nokia. Nokia’s Indian bank accounts were also frozen, but the company was able to regain access by the end of September.

The dispute in India is one of the final hurdles that must be surmounted for the completion of the deal with Microsoft for the acquisition of the handset division. The company released a statement saying, “Nokia is committed to getting its Indian assets unfrozen, and once again calls on the Indian government and tax authority to work with urgency towards a solution.” Both companies have expressed confidence that the dispute would be resolved before the completion of the deal, but if they are wrong, Nokia may operate the manufacturing plant as a contractor until ownership can be transferred to Microsoft.



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