Axiata's Nepal unit Ncell pays RM559m to settle tax dispute

PETALING JAYA: Axiata Group Bhd’s Nepal unit Ncell Pvt Ltd has settled an additional NPR13.6 billion (RM559 million) as payment to the authorities there, after a tax dispute threatened to derail its 4G rollout plans.
Ncell rolled out 4G services in Kathmandu Valley on June 1.
Axiata announced the acquisition of an 80% stake in Ncell back in December 2015 for US$1.365 billion (RM5.87 billion) from TeliaSonera Norway Nepal Holdings AS. The tax dispute involves the payment of capital gains tax which is due to the Inland Revenue Department (IRD) from the deal.
“With this conclusion, Ncell can now focus on proceeding with our investment and service expansion plans, in particular, with regard to 4G rollout which will leapfrog Nepal’s digital economy, without any further obstacles,” said Ncell managing director Simon Perkins in a statement filed with Bursa Malaysia yesterday. The payment was made on behalf of TeliaSonera, the statement read.
“Despite Ncell not being a party to the transaction and neither Ncell having received nor made any payments in relation to the transaction, the deposit and closure of this matter is part of its commitment to continue serving Nepal,” Ncell said in the same statement.
The Nepal Telecommunications Authority reportedly backtracked on its decision to grant Ncell a 4G licence until the ongoing dispute over capital gains tax in relation to the sale of Ncell to Axiata is settled. Recall that Ncell had in May last year made a payment of NPR9.9 billion or RM411 million.
Just days after the news surfaced, Ncell said it had made a further advance deposit of about NPR13.6 billion (RM559 million) to Nepal’s Large Tax Payer Office (LTPO).
“Based on the total advance deposit placement by Ncell to date, the LTPO in its confirmation letter to Ncell today conclusively certified and acknowledged that Ncell has fully complied with the direction of depositing advance tax pursuant to Section 95A of the Income Tax Act, 2058 (2002), and the company is now fully cleared in relation to the transaction (sale of Ncell) which attracted capital gains tax under the Income Tax Act, 2058 (2002),” Ncell noted.
The conclusion of the tax dispute sent Axiata’s share price to close 5 sen higher at RM4.99 yesterday on some 4.4 million shares done.
Despite Ncell’s statement that it has been cleared for the transaction however, a report out of Nepal in the Kathmandu Post has questioned whether Ncell may be subject to further payments.
The report states that under Nepali law 15% of the 25% capital gains tax on foreign investors is to stay with the company sold, with the remaining 10% paid by the seller.
In this case Ncell has paid the 15%; however, TeliaSonera, which has exited the country, still owes the 10%. The report highlighted that the LTPO could ask Ncell to pay TeliaSonera’s portion as well if the latter fails to pay up.
According to the report, LTPO under the IRD has not determined the total taxable amount in the biggest corporate deal in the history of Nepal.
To date, Ncell remains one of the largest tax payers in Nepal with over NPR160 billion paid over the last 13 years ( from 2005 to June 1, 2017). Ncell contributes 3.2% to the gross domestic product of Nepal. Its capital and operational investment in 2016 alone amounted to US$258 million. Through its operations, directly and indirectly, Ncell supports close to 110,000 jobs in Nepal.