Xiaomi, a surging tech presence from China, could be expanding its business to the United States in the next few months. However, prospects are dimmer after the Ministry of Finance released an audit of the company claiming that it failed to pay taxes on foreign gifts and reimbursements.
The Financial Times reports that the audit is part of the government’s strategy to tackle businesses taking advantage of legal gray zones in tax accounting to reduce their dues. While long avoiding its most profitable sectors, Beijing has finally started to investigate steel, coal and tech companies which, in particular, seemed to have an “absence of territorial restrictions on business operations” when transferring money from international bank accounts and not reporting the moves.
In the case of Xiaomi, it had paid roughly $86,000 in back taxes. The company said in a statement:
The annual inspection by China’s Ministry of Finance was carried out in 2017, which means it was an inspection of the quality of accounting information in 2016… there was no tax evasion.
News of the audit sent Xiaomi’s newly-listed shares in Hong Kong plunging by as much as 5 percent during Tuesday trading. The company is down 30 percent from its IPO price in July.
Xiaomi recently started operations in North America, Western Europe and has opened a 24-hour retail store in Russia.