EXCLUSIVE: 84% of the ₹5,551.27 crore of the alleged illegal remittance by Xiaomi India were to the Qualcomm Group

• The Enforcement Directorate (ED) recently ordered the seizure of ₹5,551.27 crore from Xiaomi India.
• The seizure was ordered under FEMA for illegal remittances to foreign entities.
• The Karnataka High Court in an interim order has put a stay on the seizure.
• An insider has now exclusively informed Business Insider India that 84% of the amount was remitted to the Qualcomm Group.

Xiaomi has been under the scanner of Indian agencies for quite some time now for alleged tax evasion and Foreign Exchange Management Act (FEMA) violations. As per an official press release, the Enforcement Directorate (ED) recently ordered a seizure of ₹5,551.27 crore from Xiaomi India.

The ED claimed that Xiaomi India had illegally remitted ₹5,551.27 crore in February 2022. The amount was remitted to three foreign entities, one of which was the Xiaomi Group, Xiaomi India’s parent in China. Xiaomi had claimed that the amount paid was for royalties.

The ED had ordered a seizure of ₹5,551.27 crore from the company’s bank account. The watchdog had claimed that the huge amount was remitted on the instruction of the company’s parent entity in China. The financial watchdog also added that the amount remitted to two other US entities was for the ultimate benefit of Xiaomi Group in China.

The Karnataka High Court has passed an interim order, putting a stay on the ED’s seizure order. The court has adjourned the matter to May 23 and allowed Xiaomi to use the account to carry on its day-to-day activities using its bank accounts.

Through sources that did not wish to be named, Business Insider has come to know that more than 80% of these alleged royalty remittances were made to Qualcomm Group, a USA listed company through normal banking channels.

The source close to the case informed Business Insider India that 84% of ₹5,551.27 crore remitted by Xiaomi India were to Qualcomm, the company that supplies the majority of the chipsets used by Xiaomi India in its products.

It is to be noted that the amount of ₹5,551.27 has been remitted by the company since 2015.

This means that approximately ₹4,663.1 crore were remitted to the Qualcomm Group. While the amount is huge, it is not far-fetched considering that Xiaomi uses Qualcomm chipsets in the majority of its devices.

Royalty payments to Qualcomm or other chipset makers such as MediaTek are done by all the smartphone makers in the industry towards licensed technologies that include standard essential patents and other intellectual property (IP). Any company that does not make royalty payments can be held guilty of patent infringement.

This contradicts the ED’s stand that Xiaomi has not availed any services from the entities to whom it has remitted the money. The watchdog in a press release had claimed, “Xiaomi India has not availed any service from the three foreign-based entities to whom such amounts have been transferred.”

We approached Xiaomi India for a statement but the company refused to comment. “This matter is subjudice and under the consideration of court of law. We refuse to comment on this,” Xiaomi India told Business Insider India.

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