Uncategories Tax issues in sale of Ncell shares (Ncell to Malaysian-based Axiata)

Wednesday 13 April 2016

| 08:01

Tax issues in sale of Ncell shares (Ncell to Malaysian-based Axiata)

TeliaSonera has been moving to finalize the sale of its 60.4 percent stake in Nepali telecom giant Ncell to Malaysian-based Axiata, but the government hasn’t decided whether or not to charge capital gains tax on the country’s biggest ever acquisition deal. There are differing views regarding the matter, and the authorities are studying several aspects of the mega sale. The deal between TeliaSonera and Axiata is valued at Rs140 billion ($1.4 billion). As per the agreement signed between the two companies, TeliaSonera is selling its shares in Ncell to Axiata for around $1.030 billion. The Malaysian company will also be buying the shares of the Visor Group of Kazakhstan which owns 19.6 percent of Ncell. The deal means TeliaSonera will be pulling out of Nepal. It had entered the country in 2008 after buying a majority stake in the then Spice Nepal from the Visor Group.

 Meanwhile, the Inland Revenue Department (IRD) said it had received an application from TeliaSonera asking whether it will have to fulfil any tax liabilities with regard to the transfer of shares between TeliaSonera and Axiata. “They have sought a prior decision from us. They have also expressed their opinion that, based on several agreements and legal premises of Nepal, capital gains tax will not be applicable on the share transfer,” IRD Director General Chuda Mani Sharma told the parliamentary Development Committee on Tuesday. According to IRD, TeliaSonera has claimed in its application that it has to pay capital gains tax only in Norway, where it is registered, as per the agreement signed between Nepal and Norway to avoid dual taxation. The IRD has stated that there are two major principles for taxation in case of foreign investment—Residential Principle and Source Principle. According to the Residential Principle, a sovereign country can impose people/company to pay taxes based on its legal premises regardless of where they are based. Likewise, the Source Principle states that the host nation can seek taxes if any person/company has made income in that particular country.
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