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Nokia's India Tax Problem

Nokia Corporation’s (ADR) (NYSE:NOK) current tax liability of $340 million in India could go as high as $3.4 billion according to the Wall Street Journal. Indian authorities have frozen Nokia’s assets in the country to ensure payment of tax liabilities. The tax liabilities revolve around exemption claims on software exports that Nokia took. Nokia denies that it broke any tax rules.

Nokia is offering to deposit $370 million in cash to Indian tax authorities in exchange for unfreezing their assets. In addition, Nokia wants to settle the tax standoff before Microsoft Corporation’s (NASDAQ:MSFT) planned acquisition of its handset business. Some of the assets frozen by the Indian authorities are part of the Microsoft deal.