Indian tax authorities have ordered Aviva’s local unit to pay $7.5 million in back taxes and penalties after an investigation found that the company created fake invoices to pay illegal commissions and claimed incorrect tax credits. The tax demand is significant for Aviva’s India business, which reported a profit after tax of only $10 million in the 2023-24 financial year.
The tax authorities alleged that Aviva India paid about $26 million to vendors who purportedly provided marketing services, but were actually used to provide excess commissions to agents beyond regulatory limits. Aviva incorrectly claimed tax credits and evaded $5.2 million in taxes, authorities said.
The investigation found that Aviva used a system of fake invoices and cash payments to evade taxes, and that the vendors were “puppets” used to conceal the company’s actions. The company has denied wrongdoing, saying the allegations are “incorrect and unsustainable” and that the vendors were real and provided services to the company.
This is a significant development for Aviva’s India business, which is facing stiff competition in the country’s insurance market. The company’s operations in India are run in a joint venture with Dabur Invest Corp., a prominent local firm. Aviva owns 74% of the business, up from 49% in 2022.
Aviva has stated that it will contest the tax order through an appeal and that the order will not impact its operations. However, the tax demand is a significant blow to the company’s India business, which is already struggling to grow. The situation is also a setback for the company’s reputation in India, where it has been accused of using dubious practices to lure customers.