Staff Writer
Columbus CEO

c.2013 New York Times News Service

LONDON — Indian tax authorities froze Nokia’s assets there last week in a dispute over tax payments, but the Finnish cellphone company managed to gain access to its Indian bank accounts, Nokia said Monday.

The authorities’ move follows the announcement in early September that Microsoft had agreed to buy Nokia’s struggling cellphone unit for around $7.2 billion.

Nokia said the Indian tax authorities froze all of Nokia’s local assets, including its bank accounts and manufacturing facilities, last Wednesday to ensure that the European company could pay its future tax bill, estimated to be hundreds of millions of dollars.

Nokia successfully challenged the ruling to gain access to its Indian bank accounts, but the firm’s local manufacturing plants and other buildings remain frozen and cannot be transferred to a new owner.

“We are now working closely with the tax authorities,” Nokia said in a statement Monday. “Nokia has sufficient assets in India to meet its tax obligations.”

A spokesman for the company said the decision by Indian authorities to freeze its local manufacturing assets would not affect the Microsoft deal, which is expected to close in the first quarter of next year. Production at its Indian facilities would not be affected, he added.

While the European company has entered into discussions with local officials to resolve the issue, the freezing of Nokia’s assets follows a raid by Indian authorities this year over outstanding tax payments at the company’s manufacturing plant in Chennai, located in the south of the country.

Eager to tap into India’s affluent middle class, Nokia has been operating in the country since the mid-1990s, and it has become an important market for the company.

The firm opened its Chennai plant in 2006 and produces much of its Asha line of low-cost smartphones there. The phones have become popular with people in emerging markets who cannot afford the top-range phones from Apple, Samsung and others.

Once the world’s largest smartphone manufacturer, it has fallen far behind its rivals in the high-end phone market, while it also faces tough competition from low-cost rivals in developing economies.

Other Western companies have also faced tax issues in India. Vodafone is currently fighting efforts by the country’s authorities to force the British telecommunications company to pay up to $3 billion in taxes related to its acquisition of a majority stake in a local cellphone operator in 2007.

General Electric, Royal Dutch Shell and others also have faced similar disputes with Indian tax officials.