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 asks Ncell to pay Rs 22.44 billion by December 19

The Large Taxpayers’ Office (LTO) has asked Ncell to pay Rs 22.44 billion – of the remaining capital gains tax (CGT) – in its buyout deal by December 19.
Based on the full verdict of the Supreme Court (SC) – of November 21 – which had set Rs 21.1 billion tax liability on Ncell, the LTO has determined Rs 22.44 billion (including fines) as the pending CGT. “LTO has calculated remaining tax liability of Ncell – based on the apex court’s decision – and sent a letter yesterday asking Ncell to pay Rs 22.44 billion remaining tax,” according to the LTO.
The full text of Supreme Court had quashed the CGT liability – determined by the LTO on Ncell, which was worth Rs 62.63 billion – citing that imposing an additional 50 per cent fine on applicable CGT liability on Ncell was not according to the law.
Since Ncell had paid Rs 23.57 billion as CGT to the government on June 4, 2017, LTO had determined Rs 39.06 billion as remaining CGT liability of Ncell. However, Ncell had moved the Supreme Court seeking a stay on LTO’s decision, arguing that the office had violated the due process while reassessing Ncell’s CGT liability.
The apex court had ruled Ncell’s favour – on August 25 – observing that it could be expected to fulfil its CGT liability from February 6.

Apex Court directs Ncell to pay Rs 21.10 billion

The Supreme Court has directed Ncell to pay Rs 21.10 billion as capital gains tax (CGT) on the buyout deal of the telecom service provider, against Rs 39.06 billion fixed by the Large Taxpayers' Office (LTO).
According to the full text – of its August 25 verdict – released today, the court has directed the telecommunications company pay Rs 21.10 billion as CGT. An extended bench of five-member panel of justices Tej Bahadur KC, Purushottam Bhandari, Dambar Bahadur Shahi, Sushmalata Mathema and Manoj Kumar Sharma reduced the payable tax amount by Rs 17.96 billion. The judges had scrapped the tax liability determined by Large Taxpayers’ Office, stating that additional fees, imposed as per Section 120 (A) of the Income Tax Act, should not be part of Ncell’s total tax liability.
The Supreme Court (SC) – on August 25 – had given a ruling in Ncell’s favour in a case filed by the private telecom against Large Taxpayers’ Office (LTO) for imposing Rs 62.63 billion as applicable CGT on buyout deal of the Ncell. The LTO had officially fixed Rs 62.63 billion as applicable CGT – on April 16 – and had ordered Ncell to deposit Rs 39.06 billion, as the telecommunications company has already deposited Rs 23.57 billion as CGT and late fee.
But Ncell – on April 22, two days before the expiry of the seven-day deadline – had moved the apex court seeking annulment of the LTO decision for fixing Rs 39.06 billion as the balance of the CGT assessment including fines and interest – based on Sections 117 (1) A, 117 (1) C, 118, 119 and 120 (A) of the Income Tax Act – for the sale of its shares to Axiata Investment UK Ltd. Ncell claimed that it needed to pay only Rs 14.5 billion as CGT and not Rs 39.06 billion.
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, 2019. In its petition, the Ncell argued that the LTO's tax assessment violated constitutional rights and is against the SC verdict. Ncell also claimed that it was not given any information about the tax assessment nor was it asked for any tax filing before the tax was assessed.

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.

Bar Telecos with dues from adding services, facilities and increasing capital

Parliamentary Finance Committee directed the telecom regulator to bar telecos from adding services, facilities and increasing capital until they clear their dues.
The committee has asked the Nepal Telecommunications Authority (NTA) to recover Rs 2.96 billion dues from different telecommunication companies. After the committee's diktat, the regulator had issued a notice on February 11 giving telecommunication companies one-month deadline to clear their dues. The deadline has already expired on March 10.   But the telcos asked the regulator to extend the deadline till mid-July – instead of paying the dues – saying that they need more time to induct more shareholders and investors to pay their dues.
The outstanding dues include taxes and fees like income tax, value added tax, frequency fee, renewal fee and compulsory contribution to Rural Telecommunication Development Fund, according to NTA.
Smart Telecom owes the highest at Rs 1.4 billion, whereas United Telecom Limited (UTL) and Nepal Satellite Telecom Pvt Ltd owe the government Rs 794 million and Rs 735 million, respectively, according to the regulator, that has decided to extend the deadline till mid-July as requested by some telecom companies. Though some companies has not yet responded to NTA's ultimatum, mid-July is the final deadline extension for them to clear dues, claimed the regulator.
The UTL is increasing paid-up capital to clear the dues, while Smart Telecom is planning to clear dues after bringing new investors. Likewise, Nepal Satellite Telecom is planning to clear dues in installments, after the regulator's letter.
The parliamentary Finance Committee had earlier instructed the Finance Ministry and Communication Ministry to recover the dues from different telecom companies. The committee had also instructed the NTA to start the process of scrapping operating licenses of the telecos that failed to clear dues within the deadline.
Meanwhile, the committee concluded that there are serious flaws in tax assessment systems, after studying tax compliance by telecom companies. "While studying ownership transfer of Ncell, the committee had asked all ministries concerned to submit details of shares transfer of Ncell and Spice Nepal, all minutes of decisions, and the list of officials of Finance Ministry, Nepal Rastra Bank (NRB), Inland Revenue Department (IRD), Large Taxpayers Office (LTO), who took decisions on assessment of CGT in Ncell buyout.
Chairperson of the Finance Committee Krishna Prasad Dahal said that government agencies cannot violate instructions given by the parliamentary committee. 

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.

Government delaying action against tax cheaters

Despite clear direction of the Parliamentary Accounts Committee (PAC) to investigate and penalise responsible authorities for not recovering capital gains tax (CGT) from the seller of GSM operator Ncell, concerned authorities, after 10 months of the shares transfer, are arguing on who should pay the CGT.
According to domestic and international laws, the CGT has to be paid by the seller.
Though PAC, on May 29, wrote to the Commission for the Investigation of Abuse of Authority (CIAA) to investigate the transaction from the very beginning and penalise the officials responsible, neither the CIAA nor the government has heeded the PAC directive.
The government could lose the CGT, if the dilemma and misinterpretation of the law continues any further.
Albeit late, the cabinet last week decided to recover capital gains tax (CGT) from the seller ie Swedish telecom operator TeliaSonera on the basis of decision of the Public Accounts Committee (PAC) of May 29 and Finance Committee of June 3.
Malaysian telecom giant Axiata had bought Reynolds Holding, which held a majority stake in Ncell, from TeliaSonera at around US$ 1.03 billion in April last year. Reynolds Holding was TeliaSonera's wholly-owned subsidiary registered at Saint Kitts and Nevis, a tax haven.
The TeliaSonera 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. 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.
But the Nepali taxmen started an initiative to tax the transaction only after TeliaSonera exited Nepal.
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 and chief of the Large Tax payers' Office (LTO) Shovakanta Poudel. Sharma has been claiming that TeliaSonera does not need to pay CGT in Nepal, whereas Poudel has not yet calculated how much CGT the government owns to the TeliaSonera, currently Telia.
TeliaSonera has been however claiming that there is no need to pay CGT in Nepal since the transaction had taken place elsewhere. Responding to an email query press officer of TeliaSonera Johanna Hansson said that recent reports in Nepali media do not change TeliaSonera's view on the tax situation. "We are still of the firm belief that Telia should not pay CGT on the international part of the transaction relating to the sale of Ncell," she added.

Investors intend to pour $13.52 billion into Nepal

After the assurance from all the political parties that they are committed to protect the investment in Nepal, investors – both foreign and domestic – have shown keen interest in investing in Nepal. They signed letters of intent (LoI) for investing a total of $13.52 billion, (around Rs 1,400 billion) at the concluding ceremony of the Nepal Investment Summit 2017 today.
The intended investment amounts to more than half of the country’s GDP structure of $22.49 billion and also exceeds the budget ceiling of Rs 1,156.04 billion fixed by the National Planning Commission (NPC) for the next fiscal year 2017-18.
Amongst the interested investors, China has signed LoI worth $8.3 billion, which is more than half the total intended investment. Apart from some six foreign investors, domestic investors have also signed LoI worth $11.5 million, making for a total of 16 investing organisations.
According to industry minister Nabindra Raj Joshi, Bangladeshi investors have signed LoI worth $ 2.4 billion, whereas Japanese and UK investors showed interest in making investments worth $1 billion. Likewise, investors from Sri Lanka and India have shown keen interest in investing $ 500 million and $ 317 million, respectively, he added.
The investors have shown interest in sectors like hydropower, hotels, metro rail, airlines, tunnels, tourism, energy, agriculture, infrastructure, mines and the financial sector, amongst others, he said, adding that they have signed the LoI, which means they want to invest in various profit-generating sectors in Nepal.
However, Joshi said that in order to convert their interest into commitment, an investment-friendly environment is needed in the country and guaranteed returns from the investment. He also voiced commitment to protecting the investments.
"The summit is the beginning of glorious days ahead and the economic development of the country," he said, adding that the country is on its way to transforming itself from a Least Developed Country (LDC) to a developing country. "The investments promised will certainly help push economic growth."
 Minister Joshi requested the foreign investors to invest freely in Nepal as all Nepali politicians have committed themselves to supporting the economic development of the country. "Nepal needs stable policy no matter how unstable the political situation."
He also said that within the next decade no Nepali youth need to go to foreign countries for employment as investments will generate enough employment in the country.
Foreign investment started to flow into the country after the first Investment Summit held back in 1992, as the government then started opening up sectors for foreign investment. According to the Department of Industry (DoI), some 3,678 projects with foreign investment have been registered as of last fiscal year. The department's data also show that these projects worth investments totalling Rs 358,707.80 million in costs have generated an estimated 217,681 jobs in the country. In the 25 years since a liberal economic policy was adopted, there has been a 40-fold increase in foreign investment projects from 93 in 1990 to 3,678 in the last fiscal year, according to the department.
Of the total number of companies in the country, more than 100 as of today have transactions worth over Rs 1 billion, according to the Large Taxpayers' Office (LTO). "Some of the foreign investment companies including Ncell, Sipradi and Surya Nepal are among the large companies with transactions from Rs 10 billion to over Rs 20 billion a year, according to the LTO data.
State Minister for Industry Kanchan Chandra Bade, on the occasion, said that the government would reform all the existing policies and laws and make them business- and environment-friendly.
Likewise, chief executive officer of Investment Board of Nepal (IBN) Maha Prasad Adhikari said a number of committees had been formed to review the commitments and outcomes of the summit. "These committees will constantly follow up to materialise the outcomes of the summit and turn all investment pledges into reality,” he added.

Company (Country) – Sectors – Letter of Intent amount
Ashok Steel Industries Pvt Ltd (India) – Investment Bank, Solar, Steel Plant – $300m Plus
China Machinery Engineering Corporation (China) – Hydropower, Hospital, Kathmandu Metro (line 1 & 2) – $3bn Plus
China State Construction & Engineer Co (CSCEC) (China) – Airport, Highway, Tunnel – $2bn Plus
CTCE Group (China) – Water Suppy, Hydropower, Railways, Road, Tunnel – $1bn
Everest Chamber of Commerce & Industries (India) – Tourism – $10m
Frontier Power Ltd, London (UK) – Energy, Agriculture, Infrastructure – $1bn
Himadri Food Pvt Ltd (Pran - RFL Group) (Bangaladesh) – Food & Construction – $2.4bn
Himali Distillery Pvt Ltd (Nepal) – Pulp & Paper – $10m Plus
Medicare Environmental Management Pvt Ltd (India) – Industrial & Biomedical – $7m Plus
Radiance Renewable Technologies (Srilanka) – Hydropower, Solar, Wind – $500m Plus
RN Group of Companies (Nepal) – Constrcution & Manufacturing – $50k plus
Sichuan Baoxing Country Wonping Mining Co Ltd (China) – Mining & Minerals – $100m Plus
Sichuan Wanping Energy Science & Technology Co Ltd (China) – Hydropower, Smart Grid, Financial – $1bn Plus
Somudyak Kansai Form, Mahottari (Nepal) – Agriculture – $1m
The Kansai Electric Power Co Inc (Japan) – Hydropower (100 to 1000 MW) – $1bn Plus
Wuling Power Corporation Ltd (China) – Hydropower (Tamakoshi 3) – $1.2bn
Total – $13.52bn

FM asks to prepare detailed profile of 633 large taxpayers

Finance Minister Shankar Prasad Koirala today directed revenue officials to immediately prepare a detailed work plan for revenue mobilisation as they have to mobilise Rs 1 billion every day to meet the revenue target for the current fiscal year.

"The tax authority cannot blame anyone for inaction, as the government has been providing 100 per cent incentives," he said, asking the Large Tax Payers Office to prepare a detailed profiles of all the 633 large taxpayers across the country.

The elected government will take charge soon and the new finance minister will also go through your performance on the basis of revenue mobilisation, Koirala added. "Since the sixth month is crucial for revenue mobilisation, if necessary take stringent measures to meet the target."

Likewise, finance secretary Shanta Raj Subedi, on the occasion, said that the weakness of the revenue administration has made Rs 3.41 billion revenue loss in the first five months of the current fiscal year.

Asking the Large Taxpayers' Office administration to check the tendency of individuals gaining and institutions losing, he asked tax officials to bring multinational companies under the tax net in a transparent manner.

The Large Taxpayers' Office contributes to around half to the total tax mobilisation. Established to give one-window service to the large taxpayers, it looks after taxpayers, who pay over Rs 400 million annually, apart from medical colleges that pay over Rs 250 million annual tax.