India Confiscates Rp10.5 Trillion In Xiaomi Assets, Allegation Of Illegal Remittances

Xiaomi Corp. at odds with the Indian government. (photo: doc. pixabay)

JAKARTA – The feud between India and China is taking place again. This time in technology. The reason is, the Indian government has confiscated assets belonging to Xiaomi worth 725 million US dollars (Rp 10.5 trillion) from a local bank account owned by Xiaomi Corp after an investigation and allegations that the electronic device manufacturer made illegal remittances.

Authorities said the illegal money was sent to foreign entities under the pretext of paying royalties.

Quoted from Reuters, Tuesday, May 3, Xiaomi said in a statement that they had complied with the regulations in force in India and in conducting transactions, of course, the transaction was legal and correct.

"This royalty payment made by Xiaomi India is for the technology and licensed IP used in our Indian version of the product... we are committed to working closely with government authorities to clarify any misunderstandings," Xiaomi said in a statement.

India's Directorate of Enforcement is investigating alleged violations of India's Foreign Exchange Act against the China-based company's business practices.

There was also the transfer of funds, which was also worth 55.5 billion Rupees, to three entities, one of which was for Xiaomi China, which was referred to as a royalty payment transaction.

While the other two entities are still unknown. However, it is claimed that the transaction was carried out for the main benefit of the Xiaomi group entity.

"A very large amount in the name of royalties was sent on the instructions of their Chinese group parent entity," the directorate said as reported by Antara.

The directorate's action against Xiaomi signals wider scrutiny of the Chinese smartphone maker, whose India office was raided in December 2021 in a separate investigation into alleged income tax evasion.

The former head of Xiaomi India at the time, Manu Kumar Jain, has been summoned for questioning as part of the directorate's investigation. Manu Kumar Jain, who is now Xiaomi's VP of Global, has fulfilled the investigator's summons to undergo an examination.

The Enforcement Directorate also asked companies for details on foreign funding, shareholding and funding patterns, financial reports and information from key executives who run the business.

Xiaomi is India's leading smartphone seller in 2021, with a 24 percent market share according to Counterpoint Research.

Many Chinese companies have struggled to do business in India due to political tensions after border clashes in 2020.

India with security concerns has finally banned more than 300 Chinese apps since then, including popular ones like TikTok, and has also tightened norms for Chinese companies investing in India.