Kathmandu, February 18

The Supreme Court has said it would release the full text of its verdict on capital gains tax of over Rs 61 billion applicable on the Ncell buyout deal soon. The full text of the verdict will pave the way for the Large Taxpayer Office to formally initiate the process of collecting CGT from Ncell, the largest private sector telecom company in Nepal, and its parent company, Axiata, which is based in Malaysia.

A source at the Supreme Court said the first draft of the full text had been prepared and was being cross-checked by justices of the grand full bench that issued the verdict. “The final full text of the verdict will be released in a few days,” the source said.

On February 5, a grand full bench of the Supreme Court led by Chief Justice Cholendra Shumsher JB Rana had ordered the government to collect CGT from Ncell and Axiata.

Axiata had bought Ncell from Sweden-based Telia. Although CGT is paid by companies that sell assets, the SC had told Axiata, the buyer, to foot the tax bill, as Telia, the seller of Ncell, had left the country. This verdict issued by the apex court has put an end to the years-long controversy over who should foot the tax bill following the sale of Ncell by Telia to Axiata.

Significance

• It will pave the way for the Large Taxpayer Office to formally initiate the process of collecting capital gains tax from Ncell and its parent company, Axiata

Verdict

• On February 5, a grand full bench of the SC had ordered the government to collect CGT from Ncell and Axiata

Tax amount

• The Ncell buyout deal was subject to capital gains tax of around Rs 61 billion, but if late fees are factored in, total tax amount will surpass Rs 61 billion. Ncell has paid tax instalments of around Rs 23 billion

Despite this verdict, the LTO, the authorised body for levying the tax, has not been able to initiate the process of collecting the applicable CGT because of lack of full text of the verdict. “We need full text of the verdict to formally initiate the process of collecting the CGT,” said LTO Chief Dhani Ram Sharma. “However, we have started making preparations to collect the tax so that we can act as soon as the full text is available.”

Axiata Group Berhad, through its wholly-owned subsidiary, Axiata Investments (UK) Limited, had bought 80 per cent stake in Ncell for $1.4 billion in December 2015.

The Ncell buyout deal was subject to capital gains tax of around Rs 61 billion, according to the LTO. But if late fees are factored in, total tax amount will surpass Rs 61 billion, LTO said. So far, Ncell has paid tax instalments of around Rs 23 billion, which will be deducted from the total tax amount.

The LTO had determined the capital gains tax on Ncell buyout deal based on its own calculation. The LTO had to resort to this measure as the company that sold Ncell did not provide details of profit generated from the buyout deal. The LTO has said it will instruct Telia to submit documents on sales of Ncell once it receives the full text of the verdict to determine the exact tax amount.