Finland seeks negotiated settlement of Nokia tax dispute

The application for negotiated settlement of the tax dispute was filed under DTAA between India and Finland

The Finnish government is seeking a negotiated settlement to the Rs 2,000-crore tax dispute between the country's telecom company Nokia and the Indian tax authorities.

"The Government of Finland has filed an application with the Indian government to consider and settle the Rs 2,000 crore Nokia tax case under the Mutual Agreement Procedure (MAP)... We will take decision soon," a senior Finance Ministry official said.

The application for negotiated settlement of the tax dispute was filed under the Double Taxation Avoidance Agreement (DTAA) between India and Finland, the official said.

The MAP, which is a part of the DTAA, provides for alternative mechanism for resolution of  dispute.

The government, however, is not bound to accept the request under the MAP and it had earlier rejected a similar request in case of Vodafone which is facing a tax dispute.

The Income Tax Department had slapped a tax notice of Rs 2,000 crore on Nokia's Indian subsidiary for violating the withholding tax norms since 2006 while making royalty payments to the parent company in Finland. The tax demand which also included penalty, however, was stayed by the Delhi High Court.

When contacted, Nokia said: "We can confirm that the mutual agreement procedure under the India-Finland tax treaty has indeed been invoked, but given the fact that the tax case remains open...We cannot comment on any details at this stage."

The company, it added, "looks forward to a prompt and just resolution to the matter".