Aviva Under Scrutiny: Alleged Tax Evasion in India

British insurer Aviva's India unit is under investigation for allegedly evading taxes through fake invoices and clandestine cash payments. The Indian tax agency claims Aviva breached local regulations by paying $26 million for non-existent services, leading to $5.2 million in unpaid taxes and potential fines of up to $11 million.

British insurer Aviva revealed on Saturday that its India unit is "actively engaging" with local authorities concerning alleged tax evasion practices.

According to a Reuters report on Friday, an Indian tax agency discovered that Aviva India had violated local regulations by capping commissions to sales agents through a scheme of fake invoices and secretive cash payments from 2017 to 2023. The agency found that Aviva's India business disbursed around $26 million for supposedly provided marketing and training services, which were actually fronts for funneling funds to Aviva's agents.

The fabricated invoices allegedly allowed Aviva to claim tax credits and avoid paying $5.2 million in taxes in India. Consequently, the company may face penalties up to $11 million, nearly equivalent to its 2023 profit from its life insurance operations in the country. Addressing the issue, a UK-based spokesperson for Aviva described it as an "industry wide issue", noting that the Indian joint venture is "actively engaging with the relevant authorities".

Aviva holds a 74% stake in its joint venture with Dabur Invest Corp, a well-known local entity. This case is part of a broader probe into over a dozen Indian insurers for allegedly evading $610 million in unpaid taxes, interest, and penalties.

Aviva maintained that it faces "a small potential tax claim" and stated "there has been no adverse ruling or penalty against Aviva" thus far.

(With inputs from agencies.)