Finally, Ncell to go public

Yet another multinational company – after Unilever Nepal – is going public soon.
A private telecom service provider, Ncell Pvt Ltd has converted itself into a public company, in line with the Nepal Telecommunication Authority (NTA) directives.
The company has also been renamed ‘Ncell Axiata Ltd’ from its earlier registered name Ncell Pvt Ltd, giving an indication to float share to the general public. Axiata is its parent company. Axiata is a multinational telecommunications conglomerate listed in Malaysian stock exchange.
Issuing a notice today, the first private mobile operator said that it has renamed ‘Ncell Axiata Ltd’ and got transformed into the public company following a decision of the Office of Company Registrar on Monday.
Earlier in 2016, a leading Asian telecommunication group headquartered in Malaysia Axiata Group acquired Ncell from TeliaSonera and Reynolds Holdings at $1.365 billion. The deal secured Axiata an 80 per cent equity interest and controlling stake in Ncell.
Nepal Telecommunication Authority (NTA) – the regulatory body of mobile service providers – had issued a circular to the licensed telecom service providers to offer their shares to the public. 
Another telecom service provider Nepal Telecom is already listed at Nepal Stock Exchange (Nepse). Ncell will be not only the second multinational company to be listed at the stock exchange but also second telecom service provider to be listed in the stock exchange.

Ncell pays Rs 4.5 billion in CGT

Ncell has started paying its outstanding capital gains tax (CGT), though in installment.
“Of Rs 22.6 billion pending CGT that the Large Taxpayers’ Office (LTO) has asked Ncell to pay, it has deposited Rs 4.5 billion at the tax office today,” the LTO confirmed, adding that the Ncell has also sought permission to pay the remaining outstanding CGT on installment. “Though Ncell has sought the facility of paying the remaining CGT in installments, the LTO is yet to take decision on it.”
According to the section 110 (A) of the Income Tax Act, the tax officer can provide the facility of paying outstanding tax on an installment basis, if the taxpayer makes a written request for such a facility before the tax office files a case in court against such taxpayer.
After a prolonged court battle, the Supreme Court (SC) had determined Rs 22.44 billion as the remaining CGT liability of Ncell. The LTO has thus given Ncell an ultimatum to pay Rs 22.6 billion – including interest – on December 23.
By depositing Rs 4.5 billion as CGT today, the telecom company has hinted at complying with the SC verdict and the LTO direction, the LTO claimed, adding that Ncell has though been concerned over CGT controversy, it has moved to an international tribunal, which recently ordered the government to halt CGT collection from Ncell.
The interim order issued by International Centre for Settlement of Investment Disputes – World Bank’s dispute settlement body on international investment – is obligatory for countries that are its members and the government’s move to collect the outstanding CGT from Ncell amid the International Centre for Settlement of Investment Dispute’s interim order, is contradictory. Ncell, along with Axiata (UK), which now owns Reynolds Holding, filed an application at the global investment settlement body, in April claiming that Nepal’s conduct in relation to capital gains tax imposed on the mobile company is against the Bilateral Investment Treaty between Nepal and the United Kingdom (UN).
Axiata Investments (UK) and Ncell moved the international dispute settlement court in April after LTO asked Ncell to foot the capital gains tax bill of Rs 62.63 billion on Ncell buyout deal.

Ncell gets two-week ultimatum to pay CGT dues

The Large Taxpayers Office today gave an ultimatum to Ncell to clear its outstanding capital gains tax (CGT) dues within 15 days.
The LTO’s ultimatum to Ncell to clear the dues came on the same day that the tax office received an official letter from an international investment dispute settlement court asking it not to initiate CGT collection process from Ncell.
Issuing an interim order last week, the International Centre for Settlement of Investment Disputes (ICISD) had directed Nepal not to ‘take any steps’ to enforce its decision to collect Rs 22.4 billion in outstanding CGT – including interest and penalties – from the sale of Ncell by TeliaSonera Norway to Axiata UK. The LTO officially received ICSID’s order today, confirmed the LTO officials. Though LTO claimed thagt it will discuss about the ICSID’s letter with the government, it has – contrary to ICSID’s directive – directed Ncell to clear the outstanding CGT dues within two weeks.
Based on the verdict of the Supreme Court, the LTO had asked Ncell to deposit Rs 22.44 billion remaining CGT dues within 15 days on December 8. However, Ncell did not clear its dues within the given time forcing the LTO today to give ultimatum to deposit Rs 22.6 billion tax dues – including interest and late fees – to telecom service provider.
The government will take necessary action on the basis of the Income Tax Act, if Ncell fails to clear dues within the time, the letter reads, adding that the LTO will take action based on provisions mentioned from Section 104 to 109 of the Income Tax Act.
However, experts said that the interim order issued by ICSID is obligatory for countries that are its members based on previous tribunals.

LTO recognises NT as highest taxpayer

The Large Taxpayers’ Office (LTO) today felicitated Nepal Telecom (NT) as the highest taxpayer – in terms of income tax from telecommunications sector – a couple of days after the government felicitated 15 firms as highest taxpayers of the fiscal year 2018-19.
Inland Revenue Department (IRD) has – marking the National Tax Day on Sunday – recognised some 15 top tax contributors as usual. But telecom companies – both Nepal Telecom and Ncell – could not make it to the top taxpayers’ list, unlike earlier years. The government generally recognises firms and individuals on the basis of income tax they pay, which is why both telecom firms could not make it to the list of top taxpayers of IRD for last year, though Ncell had earlier bagged the title of highest taxpayer institution for two consecutive fiscal years 2012-13 and 2013-14.
The LTO felicitated Nepal Telecom today as the largest taxpayer – based on income tax – among firms under its jurisdiction, though the telecom could not make it to the list of IRD’s top taxpayers.
There are some 13 tax offices in the Kathmandu valley under the jurisdiction of LTO. The Nepal Telecom was the highest taxpayer from the service sector.
Among the two telecom service providers, Ncell is regarded as one of the largest contributors of tax to the government but it also could not make it to the list of both IRD and LTO this time. According to a report published by Ncell’s parent company Axiata, Ncell paid $257 million in taxes – some 4.2 per cent of total tax revenue of the Nepali government in 2018 – last year. The domestic sources have also confirmed that Ncell had paid almost Rs 32 billion in taxes to the government last year. But Ncell could not make it to the list of top taxpayers, as the company did not meet the criteria for the recognition.
According to the criteria, a taxpayer should have paid necessary taxes regularly and on time, does not have pending dues and has submitted all the details sought by the government.

Supreme Court rules in favour of Ncell

The Supreme Court today quashed a decision of the Large Taxpayers' Office (LTO) to impose Rs 62.63 billion capital gain tax (CGT) on the Ncell Private Limited, popularly known as Ncell.
A five-member full bench of justices Tej Bahadur KC, Purushottam Bhandari, Dambar Bahadur Shahi, Sushmalata Mathema and Manoj Kumar Sharma has annulled the claim of LTO that the telecom service provider has to pay remaining Rs 39 billion as CGT as it has already paid Rs 23.57 billion.
The Ncell – on April 22 two days before the expiry of the seven-day deadline for settling the balance of the CGT assessment including fines and interest – had moved the Supreme Court challenging the CGT assessment made by the LTO. The telecom service provider claimed that it needed to pay only Rs 14.5 billion as CGT, and not Rs 39.06 billion as determined by LTO for the sale of its shares to Axiata Investment UK Ltd by the TeliaSonera. The SC had – after the Ncell’s claim – stayed the LTO’s decision to collect remaining Rs 39.06 billion tax. But today issuing a verdict, the apex court gave a ruling in Ncell’s favour and against Large Taxpayers’ Office (LTO) for determining Rs 62.63 billion as applicable CGT on Ncell buyout deal.
The Ncell had maintained that the tax assessment was against the SC verdict handed down by a larger full bench led by Chief Justice Cholendra SJB Rana on February 7 this year. The court verdict stated that Ncell and its parent company Axiata should pay the CGT and asked the LTO to assess the tax within three months. The LTO had simply transferred the assessed tax from TeliaSonera to Ncell and its parent company Axiata.
The LTO had officially determined Rs 62.63 billion as applicable CGT on the Ncell buyout deal on April 16 and ordered Ncell to deposit remaining Rs 39.06 billion, as the telecom company had already deposited Rs 23.57 billion as CGT and late fee.
Today the SC ruled that LTO’s decision to impose remaining Rs 39.06 billion CGT on Ncell was wrong, as the LTO calculated the whole due amount without deducting the advance CGT that Ncell had paid earlier. After the decision, the Ncell has to pay Rs 14.5 billion in CGT in the Ncell buyout deal by the Axiata Investment UK Ltd from the TeliaSonera, a public listed company from Scandinavian country that boosts transparency in financial dealings. 

Axiata moves to international arbitration against Nepal government

The tax dispute between Ncell and the government has entered into a formal process of international arbitration as Axiata and Ncell has formally registered a case against the government of Nepal –  over capital gains tax (CGT) levied by the tax authorities in Nepal – at the International Centre for Settlement of Investment Disputes (ICSID).
According to a notice published on the ICSID website today, Axiata UK filed a request for arbitration before the ICSID – a body under the World Bank Group – three weeks ago as it was dissatisfied with the Nepal government’s decision to charge CGT worth Rs 39 billion. Axiata UK and Ncell filed the case at the ICSID on the basis of a bilateral investment treaty (BIT) signed between Nepal and the UK in 1993. The treaty talks about taking the investment-related dispute to the ICSID, based on a multilateral treaty. With the ICSID registering the case, the process of formation of a tribunal begins under the Bilateral Investment Treaty, though it is not yet clear that the BIT between Nepal and the UK is applicable to companies in Saint Kitts and Nevis and Malaysia or not as Nepal has not signed any BIT with those countries.
The Axiata – the new owner of Ncell – was dissatisfied with the tax evaluation on the purchase of an 80 per cent stake in Ncell, via Reynolds Holdings Limited which is based in Saint Kitts and Nevis in the Caribbean.
“Axiata has to send a proposal on the number of arbitrators within the next 10 days,” according to corporate lawyer Sementa Dahal. “The number of arbitrators may vary from one to three,” he said, adding that the government gets 20 days to respond to Axiata’s proposals. “Once there is agreement by both parties the arbitration proceedings will be initiated.”
Failure to agree means the case will go into default and ICSID shall mediate the process for appointment within the next 30 or 60 days from the date of registration of the arbitration case. The ICSID shall have three members for settling the matter. Likewise, Axiata UK and the government of Nepal shall appoint one arbitrator each and another will be chosen as agreed by both parties.
In case the parties fail to do so, the international arbitration body itself will form a tribunal within the next 30 to 90 days from the date of registration and go ahead with the arbitration proceedings. “Before the formal arbitration proceedings begin, both parties may also choose to conduct pre-hearings for an amicable settlement,” Dahal said, adding that it may take two to three years for a final verdict through arbitration though it’s hard to predict the timing of the final verdict.
A case filed by Ncell – the subsidiary of Axiata – is sub judice at the Supreme Court as they have lodged a petition at Supreme Court on April 22, which issued an interim order to the tax authorities to put the tax assessment issue on hold. Ncell has claimed that the CGT liability is only Rs 14 billion, not Rs 39 billion as fixed by the Large Tax Office (LTO), as interests and fines are not applicable as the tax was assessed recently. After the Supreme Court verdict in April, the LTO had assessed the tax and asked Ncell to pay a total of Rs 62 billion, including additional payables of Rs 39 billion.
Though, it’s not the first time that Nepal has been challenged in the international court, it is not yet clear how the government – that has been informed of the case filing by Axiata UK at ICSID – will respond to the matter. 
Given the complicated process, the legal battle between the tax authorities and Ncell and Axiata is set to prolong. With the new turn in the dispute, the government’s chance of getting windfall tax from Ncell and meeting the revenue target for the current fiscal year also seems far-fetched.

Ncell managing director Suren J Amarasekera steps down

Weeks after Ncell’s tax dispute reached the Supreme Court and also the International Centre for the Settlement of the Investment Disputes in Singapore, the managing director of the Ncell Suren J Amarasekera has resigned from his post.
Amarasekera notified Ncell this week that he was stepping down from his post citing personal and family reasons, according to a source at the telecom company. “Friday will be his last day in the office as according to him,” he added.
Before joining Ncell in Kathmandu, Amarasekera had worked as the strategic project's director for Axiata Group Berhad’s corporate headquarters in Malaysia, focusing on key group initiatives across its South Asian operations in Bangladesh, Nepal, Sri Lanka and Pakistan.
Amarasekera was appointed the managing director of the telecom service provider in July 2017, a year after Ncell’s majority ownership was bought by Malaysia-based Axiata Group Berhad from TeliaSonera.
Ncell moved to Supreme Court and also International Centre for the Settlement of the Investment Disputes in Singapore after the Large Taxpayers Office asked it to pay Rs 39.06 billion as capital gains tax (CGT).
Though, the tax dispute is said to do nothing with Amarasekera’s resignation, the Supreme Court – last week – continued an earlier interim order barring the Large Taxpayers Office (LTO) from collecting the dues it had determined after Ncell filed a writ challenging the procedure adopted and the amount determined by the tax authority.
Axiata has notified its shareholders on April 26 that its subsidiaries – Axiata, UK and Ncell – had filed a request for arbitration at the Singapore-based settlement centre, claiming that Nepal’s conduct with regards to the CGT contravenes international law obligations under the Bilateral Investment Treaty between the two countries.

Supreme Court stays LTO on Ncell tax

The Apex Court has stayed the Large Tax Payers Office (LTO) from recovering the Capital Gains Tax (CGT) until further notice.
The Supreme Court has issued the temporary stay order as the Ncell has moved the Court against the Large Tax Payers Office (LTO) that has served Ncell a seven-day notice to pay its Capital Gains Tax (CGT) of Rs 39 billion within a week that expired on Monday. The telecommunications moved – on April 22 – to the Supreme Court seeking an order to vacate the LTO decision one day ago the expiry of the deadline.
The telecommunications company is, though, blamed for delaying to clear its tax liability, it has asked the Apex Court to reduce CGT to Rs 14 billion, as according to it, the LTO calculations is 'unjustifiable'.
The move to challenge the LTO's tax assessment at the apex court, which had earlier issued a verdict making Ncell and its parent company Axiata liable for the CGT dues, has been interpreted by some quarters as a tactic of the telecom to either avoid its tax liabilities or at least lower them.
The Ncell move has prompted calls on social media to boycott its services until it pays the government what it owes. It is even surprising that student unions and youth wings of political party that is in government, and loose civic groups have made a public appeal urging people 'not to use Ncell sim cards' until it pays the assessed tax. They have also accused Ncell of exploiting legal loopholes to delay and reduce its tax bill, though they have been mum on who and why allowed the TeliaSonera to leave the country without paying tax. They have also not asked to punish the then tax officials, prime ministers and finance minister, why they have let the TeliaSonera leave Nepal without paying CGT and who have assured the Axiata that it will not need to pay CGT, despite the largest deal in the country's corporate history.
"We urge the authorities to not take any anti-national decision like giving a tax exemption to Ncell,” reads a statement of government-affiliate four student and youth wings. They have also urged the public to boycott the services of the telecommunications company instead they should have pressurised the government – the ruling party and their mother organisation – to deal the case diplomatic. The government can still write the TeliaSonera – that is a government listed company in Sweden and settle the tax row or let the Court decide the case, instead of creating a mass against the joint venture company.
"If Ncell does not pay tax within 24 hours, we would like to inform through this statement that more programs will be announced to pile pressure,” the statement signed by Young Communist League's president Ram Prasad Sapkota, All Nepal National Free Students Union (ANNFSU) president Nabina Lama, Youth Association of Nepal president Ramesh Kumar Paudel and All Nepal National Independent Students Union-Revolutionary president Ranjit Tamang, reads.
The students unions move will not only send a terror chill in the foreign investors but also institutionalise the corruption. TeliaSonera has been said to paid huge sum to the party leaders to let it leave the country without paying tax after siging the billion-deal with Axiata.
“In filing the petition at the apex court, Ncell wants to buy more time until the case is finalised and it is also a ploy to avoid taxes,” said a lawyer Surendra Bhandari, who had pleaded in court on behalf of a group that filed the case leading to the verdict of the Supreme Court that Ncell and Axiata should pay CGT. "A video statement by Bhandari on this issue has been shared by over 14,426 users on Facebook."
Until Ncell pays the full amount of taxes, let's run a campaign not to use its Sim, he appealed, adding, "Only if we run this campaign will Ncell be compelled to pay what it owes in taxes. Otherwise it will skip taxes amounting to billions, causing a huge loss to the country."

Ncell moves to court against LTO

A day before the expiry of the seven-day deadline to pay its capital gains tax (CGT), Ncell today has filed a writ petition at the Supreme Court arguing that the tax amount determined by the Large Taxpayers’ Office (LTO) earlier last week was not in accordance with the existing law.
The private telecom giant moved the Apex Court claiming – in its writ petition – that the LTO has erroneously fixed its tax liability at Rs 39.06 billion. The Ncell has claimed the capital gains tax should be only at Rs 14 billion not Rs 39.06 billion.
Earlier on April 17, the LTO had assessed that the tax amount of Ncell buyout – after the Supreme Court's verdict two weeks to fix it – and served the telecom company a seven-day deadline to clear the remaining capital gains tax (CGT) amounting to Rs 39.06 billion – including interest and fine – by April 23.
The LTO has fixed a total payable tax – including CGT, fine and interest – at Rs 62.63 billion. The total CGT has been fixed at Rs 35.91 billion and fine and interest at Rs 18.33 billion and Rs 8.39 billion, respectively. But the Ncell has already paid the government a total of Rs 23.57 billion in two installments.
The Swedish Company TeliaSonera had sold its 80 per cent stake to the Malaysian Company Axiata for Rs 143.6 billion in April 11, 2016, as per an acquisition deal – the biggest in Nepal’s corporate sector – signed in December 2015. But – in its petition – Ncell has said that Rs 21.54 billion it paid earlier was 15 per cent of the total capital gains in the buyout deal amounting to Rs143.6 billion. "Of the 25 per cent tax liability, 15 per cent has been paid, and the rest 10 per cent means the company needs to pay Rs 14.36 billion," the foreign direct investor said in the petition, demanding an order of mandamus along that line to the tax authorities.
Ncell has also sought an order from the Supreme Court to the authorities not to create any kind of obstructions in Ncell’s business until the case is fully settled and tax is determined.
According to LTO, it has reassessed the tax as per the Apex Court verdict, which had told the tax offices to reassess the tax within three months. Following the Supreme Court verdict, the LTO had to change its previous assessment in which it had asked TeliaSonera – popularly known as Telia Company – the seller to pay the CGT. But the political and bureaucratic nexus made the TeliaSonera leave the country easily without paying CGT against the international norms and law that seller that makes gain pays the CGT.
The mishandling – with political bickering – of the Ncell case has sent a negative to the international investor that corruption is rampant in Nepal and they can bend the law as they wish.
Ncell has stated that the Court enjoys the extraordinary authority to 'settle the dispute' and 'provide necessary remedy' to resolve the tax dispute as the Apex Court's full-text verdict had concluded that the tax offices concerned didn't rightly claim taxes from the telecommunications company while the company's shares were sold to Axiata.
The court stated that Section 57 (1) of the Income Tax Act-2058 makes Ncell and Axiata responsible for paying the CGT and not TeliaSonera.
The LTO had last Tuesday written a letter to the Ncell mentioning it to pay remaining due of CGT. The Ncell has also received the LTO letter but it moved to the Supreme Court just a day before the deadline.

LTO orders Ncell to pay Rs 39.06 billion within a week

The Large Taxpayers’ Office (LTO) today asked the telecommunications service provider Ncell to pay Rs 39.06 billion within seven days, after officially determining Rs 62.63 billion as applicable capital gains tax (CGT) on its buyout deal. Of the total tax – the LTO has determined – Ncell has already deposited Rs 23.57 billion as CGT and late fee, and the remaining amount has to be deposited within a week, according to a press note issued by the tax authority.
The LTO ordered – writing an official letter – the Ncell to clear the dues within a week, after the Supreme Court last week released the full text of its verdict of February 6. The Apex Court has – in its full text – ordered the government to recover applicable CGT on the corporate deal from Ncell and its Malaysian-based parent company Axiata within three months.
"The Ncell has received CGT determination and direction letter from LTO today,” the press release further reads, adding that Ncell should pay 25 per cent of the profit made in the buyout deal, which is equivalent to Rs 35.91 billion as CGT, apart from interest worth Rs 8.4 billion and late fee worth Rs 18.3 billion. "The total applicable CGT on the Ncell buyout deal stands at Rs 62.63 billion but the company has already paid Rs Rs 23.57 billion."
Ncell had already paid Rs 23.57 billion in total – Rs 21.54 billion as CGT and Rs 2.02 billion as fine – the telecom company should now pay the remaining Rs 39.06 billion," it reads.
Responding to public interest litigation filed by a group of civil society members led by former secretary Dwarika Nath Dhungel, the Apex Court in the first week of February ordered Ncell and Axiata to clear the outstanding CGT. However, the full text of the verdict was released only last week, in which the Supreme Court ordered government authorities to recoup the outstanding CGT from Ncell and Axiata within three months. The Court has also barred the company from repatriating profit and distributing dividend and transferring shares until the dues were cleared.
The Apex Court has made it clear that onus to pay CGT lay with Ncell and not TeliaSonera. The Supreme Court verdict had put an end to the long-drawn-out debate over whether the buyer should pay the tax when the seller does not clear its tax liability, though Ncell has reiterated its stand that the seller TeliaSonera is responsible to pay the CGT as is the international practice.
The tax office further said in its press note that after TeliaSonera sold its share to Axiata on April 11, 2016, the capital gains tax was settled at Rs 143.65 billion On June 27, 2017, the tax authority had fixed the capital gains tax of Rs 60.71 billion to be recovered from TeliaSonera. But the tax authority had initiated the process to collect CGT in the deal after TeliaSonera exited Nepal, which sent the issue to the court.
TeliaSoera is a listed company of Norway and Sweden – the first world countries that teaches transparency to the rest of the world – and the listed company in the first world has not only a nexus with shell company but also it runs away from a third world country like Nepal without paying tax. "Though we were keeping an eye on TeliaSonera and its chief executive, pressure from the political front made us let the company exit Nepal," said the tax officials –without wanting tobe named – who were involved in the investigation of the deal between TeliaSonera and Axiata, since the December 2015. 
Axiata Group Berhad, through its wholly-owned subsidiary, Axiata Investments (UK) Ltd, had bought 80 per cent stake in Ncell for $1.4 billion in December 2015. Initially, 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. 

Supreme Court orders Ncell, Axiata to pay CGT within three months

The Apex Court ordered Ncell and Axiata companies to pay capital gains tax (CGT) with interest to the government within 3 months after 'necessary evaluation'. Issuing the full text of the verdict on the years-long tax dispute today, the Supreme Court has also ordered the government to halt company’s buyout, sale of shares and distribution of bonus until it pays the CGT.
The full bench of Chief Justice Cholendra SJB Rana and Justices Meera Khadka, Bishwambar Shrestha, Ananda Mohan Bhattarai and Tanka Moktan, on February 7, had issued a mandamus order in the name of defendants Ncell and Axiata to pay the CGT, which they had avoided paying when Ncell shares changed hands three years ago. The Supreme Court had ordered the defendants that it was the responsibility of Ncell and Axiata to pay CGT on February 7.
The Court stated that Section 57 (1) of the Income Tax Act-2058 makes Ncell and the Axiata responsible for paying the CGT and not Telia Sonera, though Ncell has been claiming that the responsibility of paying CGT lies on the seller the TeliaSonera.
In April 2015, Malaysian company Axiata had bought Reynolds Holdings, which held a majority share in Ncell, from TeliaSonera for $1.03 billion. Reynolds Holdings – a wholly-owned subsidiary of TeliaSonera and believed to be registered in the tax haven of Saint Kitts and Nevis – had appreciated to over Rs 105 billion then.
The civil society members, who filed the case, claimed in their writ petition that taxes had been evaded while transferring the management from TeliaSonera to Axiata.
The Court, meanwhile, annulled writ petitions filed on behalf of Ncell and Rhynolds Holdings, claiming that they did not have any further liability to pay capital gains tax.
Ncell has already deposited Rs 23.57 billion in two installments as an applicable tax on the profit generated through the sale of the telecom company. It paid Rs 9.97 billion in May 2016 on the basis of its own calculations. It again paid Rs 13.60 billion on June 4, 2017.
TeliaSonera – a Swedish-Finnish company – has not paid any capital gains tax (CGT) on the sale of its 80 per cent share in Ncell to Malaysian company Axiata in April 2015. The listed company of the country that teaches the world about the transparency and good practice in business ran away without paying the CGT in a poor and third world country Nepal. As of June 17, 2017, the due tax amount was Rs. 60.71 billion. "It will be recalculated CGT and interest including the fines and the actual amount will be decided soon," according to the large tax office (LTO).
The controversy came to surface after the government – particularly the Inland Revenue Department (IRD and its entity LTO, did not assess the tax and also issued conflicting statements on the matter. First the IRD remained silent on who was liable for paying the tax of the profits earned from the business and services generated from Nepal but after TeliaSonera, the Swedish company, went out of the country, top government officials including the then Prime Minister Pushpa Kamal Dahal stated that the seller is liable to pay the tax, which meant Ncell wasn’t responsible.
The Court has also asked Office of the Attorney General to submit the court verdict to the defendant and execute the verdict. The Office of the Auditor General, in 2017, concluded that the profits earned from the buyout deal was taxable. It prompted concerns as to why the successive governments were not working sincerely to collect the tax from the companies concerned.

Biplov owns up to Ncell blast

Two days after a deadly blast – in front of the Ncell gate in Nakkhu – that took one person’s life and wounded two others, the Netra Bikram Chand 'Biplov'-led Communist Party of Nepal claimed responsibility for the explosion and also attacks on various Ncell towers in different parts of the country.
"We didn’t carry out the explosion targeting pedestrians," one of the Biplov-led party leaders claimed, apologising for human casualty. "We exploded the bomb to warn the ongoing corruption by Ncell."
However, fighting alleged corruption with terror is not the right and legal way rather will distract foreign investment.
Three people were injured when an improvised device exploded in front of the gate of Ncell head office in Nakkhu at around 8pm on Friday. One of the injured, Singha Prasad Gurung (49) died at around 1am Saturday at Mediciti Hospital, while undergoing treatment.
Acknowledging that the explosion at Ncell office and arson attacks on the its towers were carried out by the semi-underground Communist Party of Nepal, it also claimed that the party had no intention to target any member of the public. "The entire party rank and file is sad over the loss of a human life."
At least a dozen telephone towers of the private telecom service provider were torched in different districts including Achham, Kanchanpur, Nawalparasi, Nuwakot, Gorkha, Kaski and Myagdi on Friday night. At least four towers were torched in Myagdi alone.
The splinter of the erstwhile CPN (current Maoist Centre) – that waged a decade-long insurgency – Biplov-led Communist Party has been accusing Ncell of failing to pay billions of rupees in capital gains tax, taking the money earned from Nepal to foreign country, defying court order and buying staffers of the state-owned Nepal Telecom to make its services inefficient. The party claimed that the explosion was a warning to Ncell activities.
However, the illegal way and creating terror among the foreign investors will hit the country as Nepal is preparing to organise Investment Summit next month to lure foreign investment. The incident has raised question on the government's ability and preparedness for foreign investment, though the government has been repeatedly claiming that it will provide security to the foreign and domestic investors.
Ncell – bought by a Malaysian mobile giant Axiata from Swedish TeliaSonera in April 2016 – has been in the news for wrong reasons due to government mishandling of the case.  The then government ministers and tax officials told Axiata that it need not pay capital gains tax. But the tax officials also allowed TeliaSonera go back home without paying capital gain tax – normally paid by the seller, who gains to pay the tax – and also released money from its bank account.
The government and tax officials can still write official letter to the Sweden government through the Foreign Ministry claiming to capital gain tax, but neither the government nor the protestors including Biplov-led communist party are taking the legal and official way to resolve the problem but resorting to the vandalising and extortion destroying the investment climate of the country.
Responding to a writ petition by a group of civil society members including Dwarika Nath Dhungel, the Supreme Court on February 6 ordered Ncell and its parent company Axiata to pay capital gains tax. Five days later, the tax authority said Ncell and Axiata’s capital gains tax liability stood at around Rs 75 billion. The apex court decision has also raised serious question on the government and the law as to how come a buyer pay capital gain tax – against the international law and practice – and the seller, who gained is left to return the country,
Biplov Communist Party has been regrouping and being involved in extortion and criminal activities. It had been attacking Ncell and asking for donations too.

CGT is seller’s responsibility: Axiata

The owner of Ncell – Axiata Group – has claimed that it has no additional obligation to pay Capital Gain Tax (CGT) to Nepal government. Issuing a press note today the Malaysian telecommunications service provider claimed that the responsibility of paying CGT lied with the seller from which it acquired Ncell.
The press note in its website reads that Ncell has already made full and final payment and they were also given a full clearance by the Large Taxpayers Office (LTO) of Nepal, though the press note does not mention the amount it paid.
The company – responding to the news reports about a court verdict of Nepal – further argued that Ncell, Reynolds Holdings Ltd, and Axiata UK were given the full clearance by the tax office of Nepal of its obligations to withhold any CGT payment on behalf of seller in relation to the transactions via the letter of LTO dated 4 June, 2017.
The Supreme Court yesterday had issued a verdict asking the government to make Ncell and Axiata pay the CGT. Though the Apex Court verdict is expected to end the debate over whether the seller or the buyer should pay the CGT in a share transaction of $1.03 billion, the case seems to create further confusion in the foreign investor community.
The company has also repeated its argument that the seller – Telia, a Swedish public company – has the responsibility to pay the remaining tax amount. "The CGT is not applicable on offshore transactions and if applicable, any shortfall on payment was the responsibility of the seller," the press note in the company website reads.
The surprising angle of the largest transaction ever of Nepal is that TeliaSonera – currently Telia – is a listed public company of Scandinavian country that teaches transparency and accountability the third world countries like Nepal. The Scandinavian company chose a offshore dealing to move in and out of Nepal.
However, the Malaysian company said that it issued the statement on the basis of media reports as it had not yet received any official statement or verdict from the court. The Supreme Court is yet to issue the full text of the verdict.
Though, LTO is also waiting for full text of the Supreme Court verdict to make a final calculation, it claimed that Ncell and Axiata have to pay Rs 61 billion, as of June 2017, apart from additional applicable fines and interest for the delays. Ncell has already paid Rs 24 billion in CGT. Raynolds is the 80 per cent parent company of Ncell, and Axiata had purchased Reynolds Holdings in 2015 April.

Central bank bars Axiata from repatriation of dividends

The central bank has barred Axiata from repatriating its dividend until the issue of capital gains tax related to the Ncell deal is settled.
Nepal Rastra Bank (NRB) has barred the Malaysia-based foreign investor Axiata from repatriating its dividend, as the tax administration is in the process of taking necessary steps to recover the Capital Gain Tax (CGT). The seller of Ncell – TelaiSonera – has left the country without paying the CGT, which now  sems to be the responsibility of the buyer Axiata. The CGT issue has been under discussion in the parliamentary committees, though they have different interpretation on who has to pay the CGT, the buyer or the seller.
The Malaysian telecommunication company Axiata had acquired Ncell’s stake from the Swedish company TeliaSonera last year. TeliaSonera has already repatriated its dividend till fiscal year 2011-12.
According to the share purchase agreement between TeliaSonera and Axiata, the latter will repatriate the dividend after fiscal year 2012-13. Axiata has already submitted a request to the central bank for dividend repatriation. As the custodian of the foreign exchange reserve, the central bank is authorised to issue the final approval for dividend repatriation.
According to central bank officials, Ncell has set aside Rs 72 billion for dividend repatriation for the period between fiscal year 2012-13 to fiscal year 2015-16.
After the central bank's directive, Axiata will not be able to take away dividend until the selling company TeliaSonera clears its tax liability.
According to income tax law, of the 25 per cent applicable CGT in any major deal, it is the responsibility of the acquiring company to directly pay 15 per cent to the government as tax deducted at source and the remaining 10 per cent needs to be filed by the selling company.
Axiata – the buyer of Ncell – has so far filed Rs 23.56 billion in two installments as CGT and has claimed that it has cleared all its tax liabilities.
TeliaSonera – the seller – is accountable to pay the remaining 10 per cent of CGT, it has claimed in a response to the letter from the Large Tax Payers’ Office, that it has met all the tax requirements while operating Ncell between 2008 and 2016.
The central bank has also said no Nepali company or person can transfer funds to firms associated with TeliaSonera as it has not cleared its liability.
The central bank has also flagged other foreign companies including Renold Holdings; St Kitts and Nevis; TeliaSonera UTA, the Netherlands; TeliaSonera Asia Holding, Norway; TeliaSonera Norway Nepal Holding; and SEA Telecom Investment BB, the Netherlands.

Amarasekera appointed as new Ncell managing director

Ncell has replaced its managing director Simon John Perkins with Suren J Amarasekera.
Perkins, according to the company, will assume a new role at the head office of Axiata – Ncell’s parent company – in Kuala Lumpur supporting South Asia operations.
Amarasekera brings with him 25 years of extensive experience in the telecommunications industry, including nine years of experience as chief executive officer and 16 years of senior management experience in globally renowned telecom companies such as Singapore Telecommunications, Sri Lanka Telecom’s Mobitel, Maxis Berhad in Malaysia and Aircel in India, reads a press note issued by Ncell.
"I am proud to have been given this opportunity," he said, adding that he will be looking forward to joining Ncell and building on the brand to be one that is loved by its consumers, while contributing to the vision of digital Nepal and delivering on Axiata’s vision of advancing Asia.
Amarasekera has previously served as strategic projects director in Axiata Group Berhad’s corporate headquarters in Kuala Lumpur, Malaysia, focusing on key group initiatives across its South Asian operations in Bangladesh, Nepal, Sri Lanka and Pakistan.
The board directors of Ncell have stated they are confident that Ncell will achieve new milestones under his leadership, including digital inclusion for the overall advancement of the country.

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.

Economists urge tough laws against money laundering

Economists have suggested to the government to strengthen the law to curb the illegal outflow of money from the country.
Their suggestion came a day after the Panama Papers leak that has also fingered seven Nepalis having partnership firms in several tax havens. "Though the issue will not have any impact on Nepal at present, it will definately have adverse impact on revenue mobilisation in the future," said former chief secretary Bimal Koirala, speaking at an interaction in the capital today.
Citing the recent example of how the government is unwilling to charge capital gains tax (CGT) on the sale of TeliaSonera's ownership in Ncell to Axiata, Koirala asked the government to start tracking the money. "The Panama Papers should be a lesson for the government to make its law strong enough to prevent such illegal flow of money."
The names of the seven Nepalis mentioned in the Panama Papers have yet to be disclosed.
Koirala suggested to the government to bring all manner of earning under the tax net so as to prevent money laundering. "If the government fails to bring strong legal provision to curb illicit flow of money, drug peddlers and armed smugglers could misuse the country for stashing their illegal earnings," he said, "Such earnings from corruption and tax evasion is sent to offshore firms and back channeled to the country under the pretexts of loans and investments."
The government also needs to find ways to plug the loopholes if there are any to curb the flow of dirty money.
He also cited the example of the central bank's freezing of Rs 3.5 billion that entered Nepal in the name of Mukti Shree Group, suspecting back channeling of black money, and also asked the government to prioritise the foreign investment. "The government should not accept all kinds foreign investments," Koirala said, suggesting the government to accept only those foreign investments that pay taxes and generate employment in the country.
Likewise, senior economist Prof Dr Bishwhambher Pyakuryal, on the occasion, said Nepal's mention in the Panama Papers has raised a question mark over the country's credibility. The deficiency in trust will result in low foreign borrowings and grants, which will in the longer term hit the development and social sectors, he said, adding that it will hit the social sector hard in the long run. "Tax evasion will hit revenue mobilisation resulting in low government spending in the social sectors."
Previous international reports have also mentioned about Nepalis stashing their illegal earnings in various tax havens. The report 'Illicit Financial Flows from Developing Countries' published by Global Financial Integrity (GFI) had last year revealed that $754 million on an average every year was siphoned away from Nepal between 2003-2012.
According to the report, trade misinvoicing – misreporting the value of a commercial transaction on an invoice submitted to customs – accounted for most of the capital flight.
Likewise, the prolonged political transition in Nepal has made it easier for domestic and foreign firms operating in Nepal to launder money out of the country, the economists said.
"If the current situation persists, Nepal could face blacklisting by the international community," Pyakuryal added. Blacklisting of a country means it will not be able to do international trade and will have restricted movement of its citizens across the globe.
"Nepal should thus enter into an agreement with the tax haven countries for information sharing relating to tax and banking transactions," he suggested.
Meanwhile, a day after the Panama Papers exposé, Department of Money Laundering Investigation (DMLI) today said that it would start probe to find whether Nepalis too are holding offshore accounts.
It is calling a meeting of key stakeholders –Financial Intelligence Unit (FIU) under Nepal Rastra Bank, Department of Revenue Investigation (DRI) and Nepal Police – tomorrow to discuss on whether Nepalis have offshore accounts and whether the government agencies are aware of such accounts.
In one of the biggest leaks in the history, International Consortium of Investigative Journalists (ICIJ) on Monday made public a huge cache of documents showing how the world’s rich, powerful and famous exploit the secretive offshore tax regimes and hide their money. The documents also named the top 10 destinations, known as tax havens, where the world’s rich and powerful stash their money.