Kathmandu, March 9
The Cabinet meeting on Wednesday has decided to recover the capital gains tax (CGT) involved in the record TeliaSonera-Axiata deal of Ncell in April last year from Swedish telecommunication giant TeliaSonera — the company that sold Ncell.
Though this decision has broken the silence on whether Ncell or TeliaSonera is liable for paying the CGT, the government now will have a difficult time to collect CGT from the Swedish telecommunication company as it has already exited Nepal.
Moreover, revenue experts time and again had been pressuring the government to collect liable CGT from domestic telecom operator Ncell citing that collecting CGT from TeliaSonera is quite impossible. Similarly, TeliaSonera has also refused to pay the CGT to the Nepali government.
In such a context, the recent decision by the government seems to have increased complexities surrounding the CGT issue in TeliaSonera-Axiata corporate deal and Nepal is unlikely to recover liable CGT from the Swedish-Finnish company.
Though the government itself is unclear about the amount of CGT that Nepal should get from the TeliaSonera-Axiata deal, it is said that the amount exceeds Rs 30 billion.
As per existing laws in Nepal, the country should receive 25 per cent of the profit made from the TeliaSonera-Axiata deal. TeliaSonera had divested its stake in Ncell to Axiata for $1.03 billion.
“It is not clear on what basis the government has decided to recover CGT from TeliaSonera. There are fewer chances that the government will be able to collect CGT from the Swedish company,” a revenue official told The Himalayan Times seeking anonymity.
Had Nepal signed the Double Taxation Avoidance Agreement (DTAA) with Sweden, there would have been some chances that Nepal could recover CGT through bilateral talks with the Swedish government based on that agreement.
“However, we don’t have such agreement with Sweden,” the official added.
Another option that the government could now adopt to recover liable tax from TeliaSonera is to hold strong bilateral talks with the Swedish government, according to the official.
A version of this article appears in print on March 10, 2017 of The Himalayan Times.