Money

LTO plans to conduct tax assessment of Ncell deal

- BIBEK SUBEDI, Kathmandu

Jul 17, 2016-

The Large Taxpayers’ Office (LTO) has said it will conduct a tax assessment of the Ncell deal to determine the tax to be levied after it failed to receive remaining portion of the Capital Gains Tax (CGT) from Ncell within the last fiscal year.

A tax assessment takes four years as per the Income Tax Act 2000.

The LTO has insisted Ncell is liable to pay the tax as its previous owner—Swedish-Finnish company Teliasonera—exiting Nepal without paying the applicable tax. Ncell, however, has been claiming Teliasonera, which made capital gains from the sale of Ncell, should pay the tax. In April, Teliasonera sold Ncell to Malaysia-based Axiata.

Succumbing to steady pressure from various stakeholders, Ncell had paid Rs9.96 billion as tax deduction as source (TDS) claiming the amount to be 15 out of the 25 percent of the CGT. It had claimed amount was paid on behalf of Teliasonera.

Under Nepal’s tax system, a taxpayer company can itself assess the tax to be paid to the government based on its transactions. If the tax authority does not believe the tax assessment of the taxpayer or the taxpayer does not make payment, the authority goes for tax assessment to determine applicable tax.

In a record deal struck in April, Axiata bought Reynolds Holding, which held a majority stake in Ncell, from TeliaSonera at an enterprise value of $1.03 billion (approx Rs103 billion). Reynolds Holding was TeliaSonera’s wholly-owned subsidiary, registered at Saint Kitts and Nevis, a tax haven.

Although TeliaSonera is subjected to pay CGT to Nepal government, the LTO has got hold of Ncell arguing it has the responsibility to set aside the applicable CGT from the deal as it is the company registered in Nepal. The LTO was supposed to recover the remaining 10 out of 25 percent of CGT by Friday, but it was not materialised. “Now, we will conduct a tax assessment of the deal and recover the applicable CGT,” said a highly placed LTO source. “In order to conduct the tax assessment, we will first calculate Ncell’s market value. Once it is done, the applicable CGT is calculated.”

According to the Income Tax Act, the former owner of Ncell is liable to pay interest on the applicable CTG at 15 percent per annum. Teliasonera is also liable to pay tax assessment fee of 0.1 percent. After the completion of the tax assessment, the LTO will use all its authority, including help of other government agencies, to recover the CGT from Teliasonera, the source added.

“However, if Teliasonera files the tax return and makes payment of the applicable CGT before the completion of tax assessment by the LTO, it is not liable to that fee of 0.1 percent,” said the source. “Nevertheless, Teliasonera is liable to pay the interest amount on the applicable CGT starting from Saturday.”

Ncell representatives did not respond to repeated attempts by The Post to contact them.

 

 

 

Published: 17-07-2016 08:54

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