• Reynolds Holdings has taken Rs 8.36 billion

Kathmandu, October 24

Amidst the rising controversy regarding the approval granted by Nepal Rastra Bank (NRB) for dividend repatriation of the telecommunication service provider, Ncell Pvt Ltd, without the latter clearing its taxes, the central bank said today that the approval was extended based on the clearance letter received from the telecommunication sector regulator — Nepal Telecommunications Authority (NTA).

“As a custodian of the foreign exchange reserve, the central bank always shows concerns about the repatriation of dividend of foreign companies in the country and we always consult the concerned regulator of the particular sector before approving the proposals of dividend repatriation,” said Narayan Prasad Paudel, executive director of the NRB, today.

Ncell’s major shareholder, Reynolds Holdings Ltd, had submitted its application to the central bank for the dividend repatriation from the profit of fiscal 2011-12, which was not endorsed since long as it had not fulfilled the foreign direct investment (FDI) amount that was pledged by the company while setting up the business here. Of the total paid-up capital of the company worth Rs 100 million, Ncell had pledged to bring 80 per cent foreign investment and remaining 20 per cent from the local partner.

“NRB had not approved dividend repatriation of Ncell for long as we found only Rs 58.1 million had come in from banking channel initially and we asked them to show the evidences that the capital worth Rs 80 million entered the country through banking channel,” Paudel said.

As per the central bank officials, after the company submitted evidence that entire amount it had pledged had been brought into the country through the banking channel some seven months back, the central bank had asked NTA if it had any pending issues with the company.

Responding to NRB, the telecommunication sector regulator had given its clearance citing there was no issue that needed to be settled with the company.

The central bank, after receiving the clearance letter from NTA on July 10, had approved the dividend repatriation proposal of Reynolds Holdings Ltd, West Indies. The foreign partner of the Ncell Pvt Ltd has taken away dividend in foreign currency that amounted to Rs 8.36 billion.

The controversy on the approval of dividend repatriation came to the forefront as Ncell Pvt Ltd has to pay capital gain tax (CGT) worth Rs 36 billion since the Reynolds Holdings Ltd has offloaded its shares to the Malaysian company, Axiata Group, recently.

“We had not been informed about the recent development and tax liability of the company. We gave our permission for repatriation of Ncell’s profit for fiscal 2011-12 after the latter fulfilled the requirements in accordance with the prevailing Foreign Investment and Technology Transfer Act,” according to NRB.