Truecaller is paying most taxes in Sweden despite earning 70 per cent revenue from India

Last year, Stockholm-based caller ID and spam detection app Truecaller’s total revenue stood at SEK 1.12 billion (roughly Rs 830 crore as per the exchange rate on October 3, 2022), of which India contributed SEK 787 million (around Rs 578 crore), which works out to almost 70 per cent of the company’s total revenue, as per the company’s consolidated financial report for CY21 filed with Nasdaq Stockholm. Furthermore, as per the company’s Indian subsidiary’s financial statement filed with the Registrar of Companies (RoC), its India operations reported annual revenues of just Rs 130 crore in FY21. Which means there’s a gap of around Rs 400 crore in the company’s revenues reported in India versus its India figures reported in Sweden. This is despite considering the fact that Sweden follows a calendar year reporting format and Indian companies follow the financial year timeline. When quizzed about it, the company’s spokesperson said, “The annual report figures are the official numbers used by us as a listed company. However, you pose a valid question about the difference in figures. The reason for this difference in the annual reports is due to the accounting treatment/rules when consolidating the figures from different subsidiaries in the group.”

While globally, the company reported a profit of SEK 856 million (roughly Rs 630 crore) in CY21, its Indian subsidiary, Truecaller International Limited Liability Partnership, reported a loss of Rs 11 crore in FY21. “We have been profitable for many years now. Philosophically, we wanted to be the company that makes money from very transparent sources. We have ads, premium subscriptions and Truecaller for Business,” says Rishit Jhunjhunwala, Chief Product Officer and MD of Truecaller India. We wanted to stay profitable, he adds, so that our users don’t think that “these guys are one day going to get desperate and sell our data”.

Recently, the company’s stocks had crashed after US-based investigative financial research group Viceroy Research said in a report that global privacy and data protection laws would soon make Truecaller’s business model redundant. It also suggested that the company is “skirting regulations” and/ or avoiding taxes through “uncreative loopholes”, which will inevitably be cut off.

The Viceroy report said, “When the taxman comes knocking, Truecaller is a loud and proud Swedish company. It bills almost exclusively from Sweden from advertising customers/agents despite substantially having all operations in India.” The report further states that they believe that Truecaller has failed to adhere to transfer pricing principles and is avoiding higher tax rates in India. It then adds that “It pays taxes almost exclusively in Sweden. This is despite all processing risk and operations being carried out in India.”

Meanwhile, Truecaller’s Indian subsidiary, in its audited report for FY21 stated that “The LLP is in the process of conducting a transfer pricing study as required by the transfer pricing regulations under the IT Act to determine whether the transactions entered during the year ended March 31, 2021 with the associated enterprises were undertaken at [an] ‘arm’s length price’.”

Globally, the free-to-use app earns nearly 84 per cent of its revenues from in-app advertising. “Truecaller ads have been a gateway in helping brands reach out to millions of users in a short amount of time. It is unobtrusive and will never take over your phone screen,” says Alan Mamedi, CEO and Co-founder of the company about the app’s advertising business. A smaller revenue stream is its Gold and Premium subscriptions, priced at Rs 4,999 per annum and Rs 549 per annum, respectively, in India. Premium subscriptions allow users to use the app without ads and unlock features like advanced spam blocking and contact requests among others, while a Gold subscription gives them all that and makes them eligible for a gold badge and priority services. Last year, the company also forayed into its third revenue stream, ‘Truecaller for Business’, to help businesses connect with their customers in a more trusted and efficient manner. For a monthly call volume of 50,000, the app charges businesses between Rs 15,000-19,500 per month depending on their requirements.

“The solution allows businesses to verify their identity by adding the correct name, brand logo and a green caller ID. This is especially important because a lot of scammers now try to impersonate brands. There is high potential for this, not just in India but in any market where there is a need for businesses to make a trusted connection with potential and existing customers,” says Mamedi.

For now, Truecaller for Business has over 1,000 active business customers across 33 countries. “We are seeing traction across categories of businesses with use cases around service, support and fulfillment, ride hailing, logistics and delivery, marketing, sales, security and fraud management,” he adds. Business owners can create their profiles with information like address, website, email and business hours—like Google Maps does. It is also revamping its Truecaller Priority service to distinguish between valid business and spam calls. The company identifies calls based on colours. Blue is for standard, red means spam/scam/harassment while green are calls from a verified business and purple is a priority call that has use cases for companies that operate in e-commerce, cab hailing and other fields that need a user’s immediate attention.
 

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