Wednesday, March 8, 2017

Cabinet decides to recover CGT from TeliaSonera

Putting an end to a long-running controversy, the government today decided to recover capital gains tax (CGT) from the seller of GSM operator Ncell.
The cabinet meeting held today evening directed the Finance Ministry to recover CGT as per the decision of the Public Accounts Committee (PAC) of May 29 and Finance Committee of June 3 from the seller of Ncell, informed minister for Law and Justice Ajay Shankar Nayak.
The decision means Swedish communication firm, TeliaSonera AB which has been claiming that it did not need to pay any tax to Nepal government, now has to pay CGT to the Nepal government.
Malaysian telecom giant Axiata had bought Reynolds Holding, which held a majority stake in Ncell, from TeliaSonera at around $1.03 billion last April. Reynolds Holding was TeliaSonera’s wholly-owned subsidiary, registered at Saint Kitts and Nevis – a tax haven.
The TeliaSonera AB had sold its entire stakes in Ncell as part of its strategy to exit Asian and former Soviet markets to focus on Europe and its home Nordic region, according to the TeliaSonera.
The Swedish firm had sold a 60 per cent stake in Ncell and also dissolved its interest in an additional 20 per cent stake owned by local partner in December 2015. Ncell officially became a part of Axiata Group Bhd on April 12, 2016.
Both TeliaSonera and Axiata are public companies in their respective countries. The Nepali taxmen started an initiative to tax the transaction only after TeliaSonera exited Nepal raising lots of suspicion that the tax administration played foul by letting TeliaSonera exit the country without paying CGT to the government.
The cabinet today took the decision on the basis of directives issued by the Finance Committee and the PAC as the two parliamentary committees have been regularly asking the government to recover the CGT from the seller of Ncell. As according to the international law and domestic law, the beneficiary or the seller has to pay the CGT.
The largest transaction in Nepali corporate history has been in news – affecting Ncell’s plan to rollout 4G services – also due to some of the responsible government officials, including director general of Inland Revenue Department Chudamani Sharma, who have been saying that TeliaSonera does not need to pay CGT in Nepal. Likewise, TeliaSonera (currently Telia) has also been claiming that there is no need to pay CGT in Nepal since the transaction had taken place outside the country.
However, the house committees had been regularly directing the Large Taxpayers Office (LTO)) to fix the CGT the TeliaSonera owes to the Nepal government. Ncell is one of the largest tax payers in Nepal since last couple of years.

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