Xiaomi stays confident amid India tax row

Xiaomi Corp said on Thursday that it has always operated in accordance with applicable laws and regulations around the world and it will continue to communicate with the concerned Indian authorities about tax issues.

The comments came after India's Ministry of Finance on Wednesday said in a statement that it had asked the local unit of Chinese smartphone giant Xiaomi to pay 6.53 billion rupees ($87.80 million) in import taxes after an investigation found that the company had evaded some duties.

Experts said the tax issue will not have a big impact on Xiaomi's business in India, but more efforts are needed for Chinese companies to strengthen communication with local governments.

Xiaomi said in a statement that the tax the Indian authorities wanted it to pay is related to imported goods' royalties between April 1, 2017 and June 30, 2020, and it has nothing to do with Xiaomi's recent business.

The root cause of the tax issue is that the parties have different opinions on the price determination of imported goods, Xiaomi said, adding that whether or not royalties including patent license fees should be included in the price of imported goods is a complicated technical problem.

Xiaomi said the statement is not the final result and it will continue to communicate with the concerned Indian authorities on the matter.

India is a major international market for Xiaomi's smartphone business. Market research company Canalys said Xiaomi was the No 1 smartphone vendor in India in the third quarter of 2021, with a market share of 24 percent.

Ding Jihua, deputy director of the Beijing New Century Academy on Transnational Corporations－an institute that focuses on the study of multinational enterprises－said such companies should change their mindsets from seeking a market with low taxes to focusing on markets that have better business environments.

Companies should also strengthen tax planning and make timely adjustments to the laws and tax changes in countries where they operate, Ding said, adding that Chinese companies need to strengthen communication with local governments.

On Thursday, shares of Xiaomi closed 1.12 percent higher in Hong Kong at HK$18.12($2.32).

Oppo, another Chinese smartphone vendor, is also likely to face fines in India for alleged tax evasion, according to reports from India's The Economic Times.

A spokesperson for the Chinese embassy in India said in a statement on its website on Dec 23 that the embassy had noted that the Indian tax authorities had recently launched a large-scale investigation into Chinese companies in India.

"The Chinese government has always required Chinese companies to operate in compliance with laws and regulations overseas, fully fulfill their social responsibilities and practice win-win cooperation. The Chinese government is committed to safeguarding the legitimate rights and interests of Chinese enterprises and citizens," the spokesperson said in the statement.

"The essence of China-India economic and trade cooperation is for mutual benefit and win-win results. The hard-won development of Sino-Indian economic and trade cooperation is in the common interests of the two peoples. We hope the Indian side provides an open, fair and nondiscriminatory business environment for all market entities, including Chinese enterprises," the spokesperson added.