KATHMANDU, JULY 9 The Department of Passport has officially commenced the transition from IDEMIA's e-passport platform to the new system supplied by the German consortium comprising Veridos GmbH and Muehlbauer. Effective today, the Department has deactivated IDEMIA's enrolment and passport personalisation systems, marking the beginning of the operational migration to the new infrastructure.The transition process is now underway as technical teams complete the final stages of system migration, testing, and operational readiness.The new German e-passport system is scheduled to go live on 13th of July. The bid submitted by Veridos and Muehlbauer was approximately Rs. 190 crore cheaper than IDEMIA's bid, representing a significant financial difference for the Government of Nepal. This substantial cost advantage ultimately favoured the German consortium, whose proposal was considered far more economical and financially viable for the Nepali state. Procurement experts have now raised serious questions towards IDEMIA's selective nondisclosure of their income tax records. Tender requirements The issue stems from Clause 4.9 of the Instructions to Bidders, found on page 43 of the e-passport tender document. The provision requires that a resident foreign bidder submit both a VAT/PAN certificate and a tax clearance certificate at the time of bid submission. Among all companies participating in the tender, IDEMIA appears to have been the only bidder qualifying as a resident foreign bidder because it operates through a registered branch office in Nepal, is registered with the Office of the Company Registrar, and holds a Nepalese VAT/PAN registration. According to procurement records reviewed in connection with the tender, IDEMIA allegedly did not submit either its VAT/PAN certificate or its tax clearance certificate when bids were submitted on 20 February 2025. The omission raises a significant procurement issue because these documents were mandatory eligibility requirements for resident foreign bidders. Procurement specialists argue that failure to submit mandatory documents ordinarily results in rejection of a bid during the technical evaluation stage. Consequently, the question of whether the mandatory documentation was submitted has become an increasingly important aspect of the wider procurement dispute. Auditor General Reports raise tax questions The procurement questions become more significant when examined alongside the findings of Nepal's Office of the Auditor General. The Office of the Auditor General is a constitutional body established under Article 241 of the Constitution of Nepal and governed by the Audit Act, 2075 (2019). It audits constitutional bodies, ministries, government departments, security agencies, courts, and public expenditures to determine whether public resources are managed in accordance with law, economy, efficiency, effectiveness, and propriety. Although the Auditor General does not itself determine tax liability or impose taxes, its audit findings carry considerable legal and administrative weight and frequently form the basis for recovery action by the relevant government authorities. In its Annual Report for Fiscal Year 2082, under the section titled Passport Service (page 331), the Auditor General examines the taxation obligations of foreign permanent establishments operating in Nepal. The report explains that Section 2 of the Income Tax Act, 2058 defines a resident person in a manner that includes the permanent establishment in Nepal of a non-resident person. Section 3 provides for taxation of income earned by such permanent establishments, while Section 68(3), together with Schedule 1, Section 2(6), imposes a five percent tax on income remitted abroad by a foreign permanent establishment. The report further states that a foreign permanent establishment is required to file income tax returns covering all income earned in Nepal. Most notably, the Auditor General records that the supplier under the passport procurement contract is a non-resident foreign company that has established a permanent establishment in Nepal. Based on that interpretation, the report records approximately Rs. 14.75 crore in outstanding tax relating to the five percent tax applicable to revenue generated from e-passport sales in Nepal. These findings have prompted critics to question whether a company with outstanding tax observations could have produced a valid tax clearance certificate at the time of submitting its bid, as required under Clause 4.9 of the tender documents. Repeated audit findings The issue did not end with a single audit report. In the Annual Report for Fiscal Year 2083, under the Passport Service section (page 319), the Office of the Auditor General again raises concerns regarding the same category of tax liability. This time, the report records approximately Rs. 29.58 crore in unpaid tax relating to the five percent tax applicable to income remitted abroad by a foreign permanent establishment. Inland revenue records Records from the Inland Revenue Office appear to raise further questions.According to available records, IDEMIA's resident establishment in Nepal was registered on 24 Poush 2073.However, those records reportedly indicate that income tax clearance certificates have been obtained only for Fiscal Years 2076 and 2077, while tax clearance for other fiscal years has not been reflected in the available documentation This chronology suggests that despite operating continuously in Nepal, IDEMIA now IN Groupe has obtained tax clearance for only two fiscal years. These tax records demonstrate whether all statutory tax obligations were fulfilled during the relevant period. As the e-passport procurement saga continues, attention has increasingly shifted towards IDEMIA and its broker, Siddhartha Pandey. Senior government officials have expressed concerns regarding the misinformation presented to the Prime Minister's Office following the outcome of the passport tender last year. IDEMIA's non cooperation during the transition period has also been chronically difficult to fathom once again demonstrating Pandey's unwillingness to let go of the project until the last moment. The controversy has also prompted scrutiny of commission arrangements associated with government contracts secured by Siddhartha Pandey. Questions have been raised regarding Capital Biz Solutions, a Singapore-registered company established by Siddhartha Pandey together with four other Nepali partners.