Kathmandu, July 10

Nepal Rastra Bank has barred Axiata from repatriating its dividend until the issue of capital gains tax related to the Ncell deal is settled.

The central bank has barred the Malaysia-based foreign investor from repatriating its dividend, as the tax administration is in the process of taking necessary steps to recover the CGT. As the custodian of the foreign exchange reserve, the central bank is authorised to issue the final approval for dividend repatriation.

The Malaysian telecommunication giant, Axiata, had acquired Ncell’s stake from the Swedish company TeliaSonera last year. TeliaSonera has already repatriated its dividend till fiscal 2011-12.

As per the share purchase agreement between TeliaSonera and Axiata, the latter will repatriate the dividend after fiscal 2012-13. Axiata has already submitted a request to the central bank for dividend repatriation.

According to central bank officials, the telecommunication service provider has set aside Rs 72 billion for dividend repatriation for the period between 2012-13 to 2015-16.

However, following the NRB’s directive, Axiata will not be able to take away dividend until the selling company TeliaSonera clears its tax liability.

As per the income tax law, of the 25 per cent applicable CGT in any major deal, it is the responsibility of the acquiring company to directly pay 15 per cent to the government as tax deducted at source and the remaining 10 per cent needs to be filed by the selling company.

The acquirer has so far filed Rs 23.56 billion in two phases as CGT and has claimed that it has cleared all its tax liabilities.

While TeliaSonera is accountable to pay the remaining 10 per cent of CGT, it has claimed in a response to the letter from the Large Tax Payers’ Office, that it has met all the tax requirements while operating Ncell between 2008 and 2016.

In line with the request of the tax administration to hold TeliaSonera accountable for paying its share of CGT, the central bank has also said no Nepali company or person can transfer funds to firms associated with TeliaSonera. The foreign companies flagged by the central bank include: Renold Holdings Ltd; St Kitts and Nevis; TeliaSonera UTA, the Netherlands; TeliaSonera Asia Holding, Norway; TeliaSonera Norway Nepal Holding; and SEA Telecom Investment BB, the Netherlands.

However, it is still unclear how the tax administration will recover the taxable amount from TeliaSonera in the Ncell deal, as the latter has refused to cough up any money and has already left the country after divesting its stake to Axiata Berhard Group, Malaysia.