LTO starts consultation with MoF to chart future course

  • An international court on Thursday had asked govenment to suspend CGT collection from Ncell

Kathmandu, December 20

The Large Taxpayers’ Office has started consultation with the Ministry of Finance to chart out a future course on collection of due capital gains tax on the Ncell buyout deal, as the interim order issued by an international court has raised questions over whether the government can impose tax on the sale of the telecom company.

The LTO was planning to serve a final notice on settlement of the due tax amount to Ncell soon, as the telecom company did not report to it despite the tax office’s call to deposit the outstanding CGT amount.

“We have put our plans to issue the final notice on hold for now, as an international dispute settlement court is learnt to have issued an interim order directing a complete halt in the process of collecting the capital gains tax on Ncell buyout deal,” said Jhalak Ram Adhikari, chief tax administrator at LTO. “We are currently holding discussions with the Finance Ministry and other related government bodies to determine the future course in the Ncell CGT case.”

The International Centre for Settlement of Investment Disputes — the investment dispute settlement body of the World Bank — had issued an interim order on Thursday directing the government not to take any further steps in enforcing its decision to collect Rs 22.4 billion in outstanding capital gains tax, including interest and penalties, from Ncell out of the company’s share divestment from TeliaSonera Norway to Axiata UK in April 2016.

The interim order was issued on the basis of arbitration proceedings initiated by Axiata Investments (UK) and Ncell against the Nepal government.

Though the LTO is yet to receive any official letter regarding the ICSID’s interim order to this effect, it said that tax collection process will be initiated based on the recent verdict of the Supreme Court and existing legal provisions.

“However, we will first hold consultations with government bodies, including the Finance Ministry, Inland Revenue Department and Office of the Attorney General, on this recent twist,” added Adhikari.

Axiata Investments (UK) and Ncell had moved the international dispute settlement court in April against LTO after it determined CGT liability on Ncell worth Rs 62.63 billion on the company’s buyout deal. Though Ncell has already paid a part of the outstanding CGT, Axiata and Ncell have been saying that ‘the act of imposing CGT’ in connection with the Ncell buyout deal ‘contravenes Nepal’s international law obligations under the 1993 Nepal-UK Bilateral Investment Treaty’.

Meanwhile, officials of the Ministry of Finance and IRD were reluctant to comment on the future course of the government in CGT collection from Ncell.