India in Tax Dispute With Nokia Ahead of Microsoft Deal

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LONDON -- The tax authorities in India froze Nokia's assets there last week in a dispute over tax payments, but Nokia, the Finnish cellphone company, said on Monday that it had regained access to its Indian bank accounts.

Nokia said the tax authorities froze all of its Indian assets, including its bank accounts and factories, last Wednesday to ensure that Nokia could pay its future tax bill, estimated to be hundreds of millions of dollars.

In early September, Microsoft agreed to buy Nokia's struggling cellphone unit for about $7.2 billion. Nokia challenged the ruling, gaining access to its Indian bank accounts, but its local factories and other buildings remain frozen, preventing transfer to a new owner.

"We are now working closely with the tax authorities," Nokia said in a statement Monday. "Nokia has sufficient assets in India to meet its tax obligations."

A spokesman for Nokia said the freeze would not affect the Microsoft deal, which is expected to close in the first quarter of 2014. Production at its Indian facilities would not be affected, he added.

Nokia is in discussions with local officials to resolve the issue. The Indian authorities conducted a raid at Nokia's factory in Chennai in January over outstanding tax payments.

Eager to tap into India's affluent middle class, Nokia has been operating in the country since the mid-1990s, and it has become an important market for the company.

Nokia opened the Chennai plant in southern India in 2006 and produces much of its Asha line of low-cost smartphones there. The phones have become popular with people in emerging markets who cannot afford the top-range phones from Apple, Samsung and other companies.

Once the world's largest smartphone manufacturer, Nokia has fallen far behind its rivals in the high-end phone market, and it faces tough competition from low-cost rivals in developing economies.

Other Western companies have faced tax issues in India. Vodafone, the British telecommunications company, is fighting efforts by the Indian authorities to require it to pay as much as $3 billion related to its acquisition of a majority stake in a local cellphone operator in 2007.

General Electric, Royal Dutch Shell and others companies have had similar disputes with Indian tax officials.

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This article originally appeared in The New York Times.


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