Current Affairs - International - Discussion

India and Finland have reached an agreement on the dispute between Indian Income Tax Department and Finnish Telecom firm Nokia, under the Mutual Agreement Procedure (MAP). Indian Income Tax Department issued a tax demand of around Rs 2500 crore on Nokia India for making royalty payments made to its parent company in Finland since 2006. The tax liability arose as Nokia India had imported software from its head office in Finland. Nokia India showed it as purchase while Indian Income Tax department contested it as Royalty payment. Under India-Finland Double Taxation Avoidance Agreement (DTAA) Royalties attract 10 per cent tax. At Nokia India's request, Finland initiated the MAP process under the DTAA in 2013. The process resulted in rectified tax liability of 1600 crore, which Nokia India paid in March 2018, thus bringing an end to the dispute. Mutual Agreement Procedure (MAP) is an alternate dispute settlement mechanism aimed at resolving outstanding disputes between multi-national companies and local tax authorities arising out of differential pricing treatment.