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Facebook India’s Profit Rises 40% In FY18 Despite Increased Legal Expenses

Facebook India’s Profit Rises 40% In FY18 Despite Increased Legal Expenses

The India unit's total revenue surged 53% to $74.15 Mn

Facebook is facing multiple tax disputes in the country

Indian tax authorities are tightening rules for US-based tech companies

Facebook’s India unit has posted a profit of $8.11 Mn (INR 57 Cr) in the year ended March 2018, a jump of 40% from the year before, according to media reports.

During the year, the company’s total revenue also surged 53% to $74.15 Mn (INR 521 Cr) in the same period, owing to services provided to the parent company along with money earned from its messaging app WhatsApp in the country, the company reportedly said. Facebook’s Indian arm is operated through a Singapore-registered company.

The company’s annual spending on legal and advertising has reportedly doubled this year.  For 2017-18, Facebook India’s advertising and promotional spend went up by as much as 122% to $13.37 Mn (INR94 Cr) while its legal department saw costs rising by 85% to $11.1 Mn (INR 78 Cr).

With 294 Mn users, India is Facebook’s largest market globally.

The filing comes a close on the heels of a central government directive which has asked US-based technology companies with Indian subsidiaries such as Google, Facebook, Dell and others to submit their financial details including global revenue, profit and sales by December 31.

Facebook financial statement showed that the company is facing several tax disputes in the country. The company is caught up in tax issues after the Centre introduced an equalisation levy — popularly known as Google tax — where a 6% tax is applicable on domestic advertising revenue.

Indian tax authorities are tightening rules for US-based tech companies operating in India through offshore-registered companies. In November this year, it was reported that tax authorities might ask Google India to pay tax on $2.18 Bn (INR 16,119.6 Cr) of revenue it earned from India over the past five years, which it has remitted to its subsidiaries in Ireland and Singapore.

Meanwhile the Mark Zuckerberg-led Facebook has had a tough year globally due to three major privacy breaches and interrogations by policy makers around the world over allegations of misuse of its platform. In India the company is dealing with the government over political ads and fake news as well as data localisation demands from the RBI for its WhatsApp payments unit — WhatsApp Pay.

To appease the government, Facebook is looking to be transparent about how it runs political advertisements. The company has reportedly written an email to individual advertisers and agencies in India stating that they will have to submit scanned copies of address and identify proofs if they wish to place an advertisement on the platform.

The political implications of Facebook ads came into light when the company was accused of spreading  misinformation and fake news after the 2016 US presidential elections.

[The development was reported by ET]