Tax authority sets Rs 87 billion in capital gains tax on Ncell deal

- PRITHVI MAN SHRESTHA, Kathmandu

Feb 11, 2019-

The tax authority has determined capital gains tax of Rs87 billion to be recovered from the two separate deals related to buyout of Ncell—a prominent telecom company—three years ago, Nepal’s tax authority said on Sunday.

According to the Large Taxpayers’ Office, Ncell and its parent company Axiata Holding—a Malaysian company—are liable to pay Rs75 billion, including interest for delaying the payment.

The Large Taxpayers’ Office statement has come after a full-bench of Chief Justice Cholendra Shamsher Rana and Justices Mira Khadka, Bishwombher Prasad Shrestha, Anandamohan Bhattarai and Tanka Bahadur Moktan issued the verdict on Wednesday that Ncell and Axiata need to the pay capital gains tax after its previous owner Teliasonera exited the country without paying it. This liability of these two companies is related to the buyout of 80 percent stake of Ncell.

Furthermore, Niraj Govinda Shrestha, who sold his 20 percent stake in the company to Sunivera Capital Ventures owned by Bhawana Singh Shrestha, is liable to pay around Rs12 billion in capital gains tax to the tax authority including interest, according to the tax office. Niraj had sold his stake just before the buyout deals for the remaining 80 percent stake.

Niraj Govinda, who paid a small amount in capital gains tax after selling his 20 percent shares, has challenged the government’s effort to impose extra tax on him in the Supreme Court through a writ. The case is currently under review at the apex court.

Of the total tax liability, the Ncell has already paid capital gains tax worth Rs23.6 billion amid strong pressure from the civil society while Shrestha had paid Rs2.83 billion. “They can deduct these amounts while making payment of their full liability,” said Dhaniram Poudel, chief of the Large Taxpayers’ Office.

Ending a long-drawn debate over whether the buyer should pay the tax when the seller does not clear its tax liability, the court last week ordered that both Ncell and Axiata were liable to pay the tax liability of TeliaSonera.

After the court’s verdict, Finance Committee under the House of Representatives on Sunday instructed the government to implement the verdict instantly right after getting the full verdict of the court.

In a record deal struck in April 2016, Malaysia’s Axiata bought Reynolds Holding, which held a majority stake in Ncell, from TeliaSonera at an enterprise value of $1.03 billion.  The Malaysian company had also acquired 19.6 percent stake in Visor Group of Kazakhstan, increasing its stake in Ncell to 80 percent.

The combined value of the 80 percent stake stood at Rs 1.44 billion. Reynolds Holdings is a shell company registered in Saint Kitts and Nevis in the West Indies.

TeliaSonera refused to pay the capital gains tax, arguing that ownership of Saint Kitts and Nevis-based Company was transferred so that it does not attract tax in Nepal.

Niraj Govinda on the other hand, paid the capital gains tax but the value of his 20 percent stake that he sold was undervalued compared to the 80 percent stake. As the transaction was undervalued, Niraj Govinda could walk away by paying less tax.

The 54th Annual Report of the Office of Auditor General exposed that the value of the 20 percent stake sold by Niraj Govinda should have been Rs36.19 billion based on the value of 80 percent stake at Rs144 billion. But, Niraj Govinda’s 20 percent stake was sold at Rs11.57 billion.

In it, the report pointed out the ill intention of evading the tax.

Published: 11-02-2019 12:09

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