The Public Accounts Committee (PAC) of the parliament has revisited the case of capital gain tax for sale of telecom company Ncell.
Swedish-Finnish company TeliaSonera has not paid capital gain tax for sale of its 80% stake in Ncell to Malaysian company Axiata in April 2015.
The PAC of the Second Constituent Assembly (CA), that doubled up as the parliament, in February 2017 had also instructed the Finance Ministry to recover the capital gain tax from Ncell but it has yet to be recovered.
The PAC has again entered the case of tax evasion and summoned Revenue Secretary Shishir Dhungana and Director General of the Inland Revenue Department (IRD) Bishnu Prasad Nepal to its meeting on Friday to take stock of the developments in tax recovery.
Revenue Secretary Dhungana told the PAC that Ncell has yet to pay Rs 60.71 billion in capital gain tax. He pointed that the government had tried to recover the amount by stopping repatriation of dividends by TeliaSonera through Ncell but an interim order by the Supreme Court stopped that.
“A capital gain tax of Rs 35.91 billion has been determined for the sale. It comes out to Rs 60.71 billion including the fines until June 2017,” Dhungana said. “The Large Taxpayer Office wrote to the Nepal Rastra Bank (NRB) to freeze TeliaSonera’s bank accounts. But the SC interim order revoked that,” he added.
He revealed that the government is also taking diplomatic initiative to recover the tax.
Malaysian company Axiata had bought Reynolds Holding, which held a majority stake in Ncell, from the Swedish-Finnish company TeliaSonera for $1.03 billion (over Rs105 billion) in April 2015. Reynolds Holding was TeliaSonera’s wholly-owned subsidiary, registered at Saint Kitts and Nevis, a tax haven.
The Income Tax Act of Nepal requires foreign investors to pay 25 percent in capital gains tax. Of this amount, 15 percent is left at the company that was sold while the remaining 10 percent should be paid by the seller. This means Ncell has to pay 15 percent of the capital gains tax while the remaining 10 percent should be paid by TeliaSonera.
Though capital gains needs to be paid by the company that gains from the deal, TeliaSonera has already exited Nepal.
Ncell has already deposited Rs 23.57 billion in two installments as tax applicable on the profit generated through sale of the telecom company. It had first paid Rs 9.97 billion in May, 2016 in tax return based on its own calculations. It had then paid Rs 13.60 billion on June 4, 2017 bowing to intense pressure and criticisms from a cross section of the society.