'TeliaSonera will not be subject to CGT on Ncell share sale'

Kathmandu, January 26

TeliaSonera, the largest shareholder in Nepali telecom operator, Ncell, will not have to pay capital gains tax (CGT) on the stake that it is planning to sell, as ‘it is a company based in Norway’, with which Nepal has signed double taxation avoidance agreement, the Inland Revenue Department (IRD) said today.

TeliaSonera, a telecommunications service provider in the Nordic and Baltic countries, Eurasia and Spain, is selling 60.4 per cent stake in Ncell, the largest private sector telecom company in Nepal, to Malaysia-based Axiata for $1.03 billion.

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Since the company made its divestment plan public in December, many are wondering whether it would be subject to CGT of five per cent or more, which is levied on profit made from the sale of assets.

“This provision will not apply to TeliaSonera because it is a company from Norway, with which we have entered into double taxation avoidance agreement,” IRD Director General Chuda Mani Sharma told the meeting of Parliamentary Committee on Development held today.

Nepal had signed the agreement with Norway in 1996.

As per the double taxation avoidance deal, earnings made by citizens and companies in a foreign land will be subject to taxation in their home countries. “This provision implies Norway, not Nepal, should impose CGT on TeliaSonera,” Sharma said.

Nepal has so far signed double taxation avoidance agreement with 10 countries, including Norway.

Although TeliaSonera will not be subject to CGT in Nepal, other stakeholders of Ncell will have to pay the tax.

Visor, a business group based in Kazakhstan, via SEA Telecom Investments BV, owns 19.6 per cent stake in Ncell. It is also selling its stake in Ncell to the Malaysian company for $335 million.

Similarly, Niraj Shrestha, a Nepali citizen, who was chosen by TeliaSonera as its local partner, owns 20 per cent stake in Ncell.

Shrestha is selling his shares in Ncell to Sunivera Capital Venture, a company owned by Bhavana Singh Shrestha, Axiata’s chosen local partner.

TeliaSonera will receive approximately $48 million from Sunivera Capital Ventures, upon closure of the deal.

“The amount is being paid because Niraj had acquired a loan of $230 million from TeliaSonera in 2012 on the back of his 20 per cent stake in Ncell,” Salomon Bekele, senior advisor at CEO’s Office of TeliaSonera had told journalists in December.

The parliamentary committee today extended a seven-day deadline to concerned government authorities to explain whether shares held by foreign and Nepali investors could be sold at different prices.