Prime Minister Pushpa Kamal Dahal on Sunday indicated that the government would not hesitate to recover due capital gains tax on sale of Ncell, the largest private sector telecom company, from Ncell itself, if the seller refuses to fulfil its tax obligation.

His comments come at a time when the government has not been able to frame a clear-cut plan to collect the due tax amount of billions of rupees from the Ncell buyout deal, as the seller has already left the country.

In the biggest corporate buyout deal in Nepal, Telia, a Swedish telecom giant, had sold its stakes in Ncell to the Malaysian company Axiata for $1.03 billion in 2015. The government has clearly said 25 percent of the profit made from the sale of Ncell should be deposited as capital gains tax.

“The government is committed to recovering the tax. There is no ‘if’ or ‘but’ in this issue,” Dahal told the parliamentary Public Accounts Committee (PAC) on Sunday. “We will try to hold a tripartite meeting comprising the buyer [Axiata], the seller [Telia] and the government and take an appropriate decision. But even if we fail to do so, we need not worry, because Ncell is still operating in the country.”

In principle, capital gains tax should be paid by sellers of assets who generate profit from the deal. Since Telia had sold its stake in Ncell to Axiata, the European company should shoulder the tax burden. But the company has already exited Nepal. Ncell, on the other hand, has been saying it is not obliged to pay the tax on behalf of Telia because it has not benefited from the deal.

The PAC had summoned PM Dahal to make his stance clear on how he intends to recover the due tax amount.

Dahal had attended the parliamentary hearing after Deputy Prime Minister and Finance Minister Krishna Bahadur Mahara said the tax issue was discussed during the March 8 Cabinet meeting “at the insistence of Dahal”. At that time, Mahara had said the PM’s Office had received a letter from Ncell seeking clarity over capital gains tax.

On Sunday, PM Dahal refuted Mahara’s claim that the discussion was held at his insistence. 

“Neither the finance minister nor I had tabled the proposal. We only held discussions to expedite the tax collection process,” Dahal told the House committee.

In the last quarter of 2015, Telia sold its 60.4 percent stake in Ncell to Axiata. Axiata also acquired another 19.6 percent of Ncell’s stake from SEA Telecom Investments BV, a company owned by the Kazakhstan-based Visor.

Ever since the deal took place, Ncell has deposited Rs9.97 billion to the state coffers as 15 percent withholding tax, or tax deductible at source for capital gains. Tax authorities have not determined the exact tax amount that Telia needs to deposit.

On Sunday, the PAC directed the Ministry of Finance to clarify its position on capital gains tax surrounding the Ncell buyout deal. The House committee also directed the Commission for Investigation of Abuse of Authority to initiate an investigation against the officials and agencies who failed to recover the tax.

Telia reiterates it owes no taxes to Nepal 

KATHMANDU: Telia, a Swedish company, which sold 60.4 percent stake in Ncell to the Malaysia-based Axiata, has reiterated that it is not obliged to file a tax return or deposit tax on sales of the Nepali telecom company to the authorities here.

On April 3, Telia received a letter from the Nepali tax authority, requesting submission of a tax return on divestment of Ncell’s shares.

“Telia’s position has not changed [on this issue], because there is no obligation to file a tax return. Also, Telia has no tax obligation in Nepal on the foreign part of the transaction,” a statement issued by the company says. “Instead, taxes should be declared in Norway, which is the home country for [seller] TeliaSonera Norge Nepal Holding AS (TSNN), which Telia co-owns with Visor.”

Nepal has signed a double taxation avoidance agreement with Norway. This paves the way for companies based in Norway and operating in Nepal to settle tax payments in the European country. (PR)