Kathmandu, February 6
Ncell and its parent company, Axiata, must foot a tax bill of Rs 61 billion, excluding late fees and fines, as the Supreme Court today directed the two companies to pay the due capital gains tax on Ncell buyout deal.
The verdict issued by the grand full bench of the apex court has put an end to the years-long controversy over who should foot the tax bill following the sale of Ncell by Sweden-based Telia to Malaysia-based Axiata.
This court order has paved the way for the Large Taxpayers’ Office to collect capital gains tax dues from Ncell and Axiata, LTO chief Dhani Ram Sharma told THT.
He, however, said the LTO was yet to receive the court verdict. “Once we get the copy of the verdict, we’ll initiate the process of collecting the due tax amount by writing letters to both Ncell and Axiata,” said Sharma.
The Ncell buyout deal was subject to capital gains tax of around Rs 61 billion, according to the LTO. “But the two companies may have to pay around Rs 66 billion in taxes if late fees are factored in,” said Sharma.
But Ncell and Axiata will not have to pay the entire Rs 66 billion, as Ncell has already paid tax instalments totalling Rs 21 billion, said Sharma. “Despite this, we’ll ask the telecommunications giant to deposit the entire Rs 66 billion. We’ll deduct Rs 21 billion only after Ncell and Axiata file a formal application demanding reduction in the tax bill,” added Sharma.
The LTO had determined the capital gains tax on Ncell buyout deal based on its own calculation. The LTO had to resort to this measure as the companies that sold Ncell did not provide details of profit generated from the buyout deal.
Companies that divest shares are given four years to submit that information to the taxman. This means details of profit generated from the deal must be submitted within this December.
Axiata Group Berhad, through its wholly-owned subsidiary, Axiata Investments (UK) Limited, bought 80 per cent stake in Ncell for $1.4 billion in December 2015.
Earlier, there were debates on whether capital gains tax should be imposed on Ncell buyout deal, as it was argued that the deal took place abroad and the Income Tax Act does not have clear provisions on offshore deals.
The foreign investment in Ncell had come from a shell company called Reynolds Holdings registered in Saint Kitts and Nevis in the West Indies.
TeliaSonera Norway Nepal had 75.45 per cent stake in Reynolds and the remaining 24.55 per cent shares in the shell company were held by SEA Telecom Investments BV, a company owned by Kazakhstan-based Visor.
The order was issued by a grand full bench of Supreme Court led by Chief Justice Cholendra Shumsher JB Rana responding to public interest litigation filed by former secretary Dwarikanath Dhungel and others.
Other members of the bench are justices Meera Khadka, Bishwambhar Prasad Shrestha, Ananda Mohan Bhattarai and Tanka Bahadur Moktan.
A version of this article appears in print on February 07, 2019 of The Himalayan Times.