KATHMANDU, March 8: Putting an end to long-running controversy, the government on Wednesday decided to recover capital gains tax (CGT) from the seller of GSM operator Ncell.
The cabinet meeting held on Wednesday directed the Ministry of Finance to recover CGT as per the decision of the Public Accounts Committee (PAC) of May 29 and Finance Committee of June 3 from the seller of Ncell, informed Minister for Law and Justice Ajay Shankar Nayak.
The decision means Swedish communication firm, TeliaSonera AB, has to pay CGT to the Nepal government.
Malaysian telecom giant Axiata had bought Reynolds Holding, which held a majority stake in Ncell, from TeliaSonera at around US$ 1.03 billion in April last year.
Reynolds Holding was TeliaSonera’s wholly-owned subsidiary, registered at Saint Kitts and Nevis -- a tax haven.
The TeliaSonera AB had sold its entire stakes in Ncell as part of its strategy to exit Asian and former Soviet markets to focus on Europe and its home Nordic region. The Swedish firm had sold a 60 percent stake in Ncell and also dissolved its interest in an additional 20 percent stake owned by local partner in December 2015. Ncell officially became a part of Axiata Group Bhd on April 12, 2016.
Both TeliaSonera and Axiata are public companies in their respective countries. The Nepali taxmen started an initiative to tax the transaction only after TeliaSonera exited Nepal.
The cabinet took the decision on the basis of directives issued by the Finance Committee and the PAC as the two parliamentary committees have been regularly asking the government to recover the CGT from the seller of Ncell.
The largest transaction in Nepali corporate history has been in news -- affecting Ncell’s plan to rollout 4G services -- also due to some of the responsible government officials, including director general of Inland Revenue Department Chudamani Sharma, who have been saying that TeliaSonera does not need to pay CGT in Nepal. Likewise, TeliaSonera has also been claiming that there is no need to pay CGT in Nepal since the transaction had taken place outside the country.
However, the house committees had been regularly directing the Large Taxpayers Office to fix the CGT the TeliaSonera owes to the Nepal government.