Truecaller, the Swedish caller ID app, on Monday said it expects to face a $90 million liability from an Indian transfer pricing audit covering multiple financial years.
The Income Tax Department visited the company’s India offices nearly two years ago, flagging alleged discrepancies in the revenue distribution between the company’s Sweden and Indian entities. The case is centred on transfer pricing, the price charged in a transaction between two related entities of the same parent company.
The caller-ID app revealed that the Indian tax authorities issued the first formal transfer pricing order for 2022-23, proposing a $2.7 million settlement in additional tax and interest.
Truecaller said it expects a formal tax demand any time now. However, the company now estimates the potential gross tax claim to increase to roughly $90 million if the same methodology is applied across all relevant financial years.
Truecaller calls tax claims “baseless”
A statement from the company said it maintains that the authorities’ claim is “baseless” and that it will “vigorously contest the claims while maintaining a strong financial position to handle any claims during the process”
Once the final additional tax is imposed in India, the company expects Sweden’s bilateral Double Taxation Avoidance Agreements (DTAAs) to prevent the huge dent in its finances. Truecaller expects to claim a corresponding tax refund of $35 million from Sweden, reducing its net exposure to $55 million.
The company reiterated its financial health, highlighting its cash and cash equivalents (CCE) of approximately $1.3 billion.
“The amount stated in the first formal so-called transfer pricing ruling from the Indian tax authorities is within the range we had expected. The total bank guarantee that we assess we need to provide until this transfer pricing issue has been resolved through the bilateral process can therefore be well managed with our existing liquidity, including the loan we raised this summer. It will not have any negative effects on our business or our ability to invest in key revenue-driving opportunities going forward,” said Odd Bolin, CFO of Truecaller.
