India seizes $725 million worth of Xiaomi Technology India Private Limited assets. According to the Indian Express, a probe from February found that it violated the country’s foreign exchange laws.
India’s Enforcement Directorate (ED) discovered that the firm sent 55.5 billion rupees in foreign currency to three foreign-based entities, including a Xiaomi entity. The activities were posed as royalty payments.
The ED said in a statement that the subsidiary from Xiaomi began transferring the money in 2015, one year after it started operations in the country.
The agency added, “Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to other two U.S.-based unrelated entities was also for the ultimate benefit of the Xiaomi group entities.”
Xiaomi has denied wrongdoing, saying that “all our operations are firmly compliant with local laws and regulations.” It explained that the payments were for in-licensed technology and IPs for its Indian products.
ED’s statement also reads, “Under the cover of various unrelated documentary façade created amongst the group entities, the company remitted this amount in the guise of royalty abroad, which violates Section 4 of the FEMA. The company also provided misleading information to banks while sending the money abroad.
Reuters reported on April 12 that the ED had worked with Xiaomi’s former India leader Manu Kumar Jain as part of the investigation. It also sought data relating to foreign funding, shareholding and funding practices, financial statements, and the profile of the company’s top executives.
In January, India’s Ministry of Finance said Xiaomi evaded nearly $88 million in import taxes between 2017 and 2020.