The Cabinet meeting on Wednesday gave clean chit to Ncell, a privately owned telecom service provider, on the capital gains tax fiasco.
The meeting endorsed a proposal presented by Deputy Prime Minister and Finance Minister Krishna Bahadur Mahara which stated that capital gains tax should be levied on seller instead of buyer.
In a record deal struck in April, Malaysia’s Axiata bought Reynolds Holding, which held a majority stake in Ncell, from Swedish-Finnish company 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.
The tax authority initiated a process to tax the transaction only after TeliaSonera had exited Nepal. The Large Taxpayer’s Office (LTO) had initially written to TeliaSonera, asking it to submit tax details, but the company argued the deal is not taxable in Nepal. Following such answer from TeliaSonera, the LTO asked Ncell to file tax return by May 7.
The Cabinet decision comes as a relief to Ncell whose various business plans including launch of 4G service were in limbo after the Finance Committee under Legislature-Parliament directed the government to stop Ncell from expanding its business unless it settles the capital gains tax issue.
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