House panel asks MoF to collect CGT from Ncell

Concerned bodies directed to look into change of ownership and taxes on sales of shares of the firm

Kathmandu, June 3

A parliamentary committee has barred Ncell — the largest private sector telecommunications company of the country — from expanding its capital base and launching new commercial schemes until it clears all applicable capital gains tax.

The Finance Committee under the Legislature Parliament on Friday instructed Ministry of Industry and Ministry of Information and Communications to process Ncell’s proposals to raise paid-up capital and launch commercial schemes only after the telecom firm settles the capital gains tax.

Issuing the ruling, Committee Chairman Prakash Jwala said, “As the firm was registered in Nepal, was operating in the country and made profits through its services provided to Nepali citizens, the profit made through sales of its shares should also be taxed in Nepal. So, the Ministry of Finance should immediately collect all applicable taxes from the company.”

Ncell is a company with a paid-up capital of around Rs 100 million. But on April 11, 80 per cent of the company’s stake owned by TeliaSonera UTA Holdings BV and SEA Telecom Investments BV was sold to Malaysia-based telecom giant, Axiata, for $1.365 billion (approximately Rs 145.59 billion).

As per Income Tax Act, 25 per cent of the gain made from the deal should be subject to capital gains tax.

After the Large Taxpayers’ Office reminded Ncell about this legal provision and asked the telecom company to deposit 15 per cent of the withholding tax, or the tax deductable at source for capital gains, Ncell has transferred Rs 9.97 billion to the state coffers.

“Ncell’s ownership has changed from time to time. However, taxes on sales of these shares were raised by undervaluing the price of asset. Concerned bodies should investigate into the matter and initiate legal action against those involved in misappropriation,” the finance committee ruled.