| July 23, 2019

Govt set to assess tax in TeliaSonera transaction

KATHMANDU, April 29: The government will assess the capital gains tax in the divestvent of Ncell by TeliaSonera to Axiata if TeliaSonera fails to self-declare its tax liability in the transaction by May 7, according to a high-ranking official at the Ministry of Finance (MoF).

Informing that legal provisions give TeliaSonera the option to self-declare and pay the tax by May 7, the official said that the government will start legal proceedings to collect the tax from the company after May 7 if the company fails to abide by Nepal's law.

"As part of the legal process for collecting tax under the Income Tax Act 2058, we will assess the transaction involved in the divestment of Ncell by TeliaSonera and then write to the company to pay the tax amount decided through our assessment," the MoF official told Republica, requesting anonymity.

The Swedish company on Wednesday issued a press statement for the second time hinting that it will not file tax with the Nepal government.

Though the government wrote to TeliaSonera requesting that it pay the tax and to that end deposit the taxes applicable to the transaction whereby the shares of Ncell were divested, TeliaSonera issued a note on its website on Wednesday saying the company's position in the matter has not changed and it remains adamant in its position issued on April 21.

On April 21, the Swedish company said the company's Norwegian subsidiary had answered the Nepal government's letter, stating that the tax should not to be filed since the transaction was not subject to tax in Nepal.

TeliaSonera's Norwegian subsidiary had answered the Nepal government's letter and refused to pay the tax. It stated, "When TeliaSonera entered Nepal in 2008, it was Ncell's parent company Reynolds Holdings Limited which was for sale and when we now exit we do so by selling our holding in the same company to Axiata."

TeliaSonera last December divested its 60.4 percent ownership in Ncell to Axiata, one of the largest Asian telecommunications groups, for US $ 1.030 billion. TeliaSonera had, moreover, announced completion of the divestment of Ncell to Axiata on April 12.

As the government received no taxes on such a huge transaction, the entire deal came to the attention of domestic media and parliamentary committees, which urged the government to seek taxes from the transaction.

Meanwhile, Chuda Mani Sharma, director general of the Inland Revenue Department (IRD), hesitated to speak about the issue. Sharma said, "We will follow the legal procedures."

Former chief secretary Leela Mani Paudyal, however, said the government should first write to TeliaSonera saying the company will have to face legal action if it doesn't deposit the tax.

Paudyal opined that the government has to freeze the profit TeliaSonera has deposited in different Nepali banks and is trying to repatriate.

"TeliaSonera had announced the transaction six months beforehand. Had the government tried to collect the tax at that time, it would have been much easier," he said.

Nepali officials have expressed surprise over the Swedish-Norwegian company.

They have urged the Swedish and Norwegian governments to look into the matter as the case could send the wrong message that Nordic companies do not abide by the tax laws of foreign countries where they operate.