The Indian government has ordered Aviva’s local unit to pay $7.5 million in back taxes and penalties after an investigation found the insurer’s India business created fake invoices to pay illegal commissions and claimed incorrect tax credits. The investigation, which began in 2023, revealed that Aviva paid $26 million to vendors who purportedly provided marketing services, but were actually fronts to give agents excess commissions beyond regulatory limits. As a result, Aviva allegedly evaded $5.2 million in taxes by using a system of fake invoices and cash payments.
The tax authority, the Income Tax Department, found that Aviva’s India business had recorded a profit after tax of only $10 million in the 2023-24 financial year, making the $7.5 million tax demand significant. Aviva faces stiff competition in the Indian insurance market, and the order could impact its growth plans.
Aviva has denied any wrongdoing, stating that the allegations are “incorrect and unsustainable” and that the vendors were not fake. However, the tax authority has maintained that the vendors were “puppets” used to conceal the company’s scheme to obtain bogus tax credits. Aviva plans to appeal the order, which it claims will not impact its operations. Dabur Invest Corp., Aviva’s joint venture partner, has not commented on the matter.
The incident highlights the challenges faced by multinational companies operating in India, where tax authorities are increasingly scrutinizing their transactions to ensure compliance with local laws and regulations. The case is a major setback for Aviva’s India business, which has been struggling to compete in a highly competitive market.