Ncell has said that it will pay the government tax, though the responsibility to pay capital gains tax (CGT) is with the seller of the company not the buyer.
“In keeping with our unblemished profile as a responsible corporate citizen committed to the welfare of the people and nation of Nepal, Ncell extends its fullest cooperation to the Government of Nepal in reaching a resolution of prevailing issues with respect to the Gains Tax,” Simon Perkins, the newly appointed managing director of Ncell, said.
Though the matter is the responsibility of the seller of shares, Ncell will resolve the matter soon, he added.
The first of its kind transaction in Nepal has landed in controversy due to bureaucratic inefficiency and dilemma.
The CTG in share transaction of Reynolds Holdings, the company which held 80 percent of Ncell shares, has become a hot issue in the country. Based on the pressure being piled from different fronts, the government is working collect tax from Ncell even though the responsibility of paying CGT rests on the seller, according to existing laws.
TeliaSonera, the then promoter of Ncell, on December 21 announced to divest its share and exit from Nepal as per its strategy to pull out from Eurasian markets. Questions about CGT was raised from that very date. TeliaSonera has been maintaining that transactions of Reynolds, which is based outside Nepal, was out of jurisdiction of Nepali tax law.
Though a section of tax authority passed on messages informally that tax was applicable, and the deal could bring tax to a tune of Rs 30-40 billion, the Inland Revenue Department has said nothing officially.
Immediately after the announcement of sales-purchase agreement (SPA) on December 21 last year, 2015, the buying party — Malaysian telecom company Axiata – had approached Inland Revenue Department (IRD) for advanced tax ruling, seeking a clear guidance on tax. Since then Axiata, as it claims, consistently followed up for the same till the closing of the deal, but there was no response from IRD at all.
Even during the parliamentary committee meeting, IRD and the government representatives said that they were looking into the advance ruling request. But not concrete decision was taken.
As the government continued to keep mum and senior authority said tax was not applicable on the deal, Axiata went ahead with the deal and closed the transactions on April 11, 2016.
TeliaSonera (now Telia Company) announced completion of transactions on April 11, and Axiata also did the same on April 12. On the same day, IRD scrapped the appeal for the advanced ruling and instructed the Large Taxpayers Office (LTO) to collect CGT and inform it duly.
Based on the instruction, LTO, on April 12, wrote to TeliaSonera to submit transactions details and assessment of capital gains within a week. To this, Telia Company reiterated its stance that tax was not applicable on sales of business holdings based out of Nepal.
By then, Telia had received all the money, as Axiata, the buyer, was not told tax was applicable, and had already left Nepal.
“IRD should have issued the ruling that tax was applicable. That would have spelt the message loud and clear, and helped Axiata to withhold the gains tax,” former chief secretary Lila Mani Poudyal said.
However, the tax authority, which did not say anything earlier, has now asked Ncell to file gains tax.
With just two days left to comply with the LTO instructions, Republica tried to reach out to Ncell to know what its position on the matter is. Simon Perkins, managing director of Ncell, said though the matter is responsibility of the seller of shares, Ncell will resolve the matter soon.