Nepal’s tax office has once again called on Sweden-based Telia to clear its tax liability emanating from profit generated from the sale of Ncell to Malaysia-based Axiata. The Large Taxpayers’ Office (LTO) has served a 15-day notice to Telia and asked it to settle the due tax amount.

“The letter was sent on Sunday,” a senior official at LTO said. “This time we have asked the Swedish company to clear the due tax amount based on its own assessment.” The letter has been dispatched through international courier service provider DHL Express. The government will count 15-days based on the date of submission of letter to Telia by DHL.

If the company fails to respond within the 15-day deadline, the LTO will calculate the tax amount on its own and direct the company to pay that amount.

Telia sold 80 percent stake in Ncell to Axiata for $1.03 billion (Rs103 billion) in December 2015. It is estimated that Telia is supposed to pay around Rs36 billion in capital gains tax in Nepal, as the law has made it clear that 25 percent of the profit made from the buyout deal must be deposited in the form of capital gains tax.

Since Telia has failed to deposit the tax amount at the time when asset was sold, the taxman here holds the right to impose a fine equivalent to 50 percent of the tax amount. On top of this, the taxman can also levy interest of 15 percent on the due tax amount.

If fine and interest are added, Telia will have to pay around Rs61.61 billion to the government. But Telia may not have to bear the entire financial burden, as Ncell has already paid 15 percent of the tax on behalf of the Sweden-based company. Ncell has so far deposited Rs23.6 billion at the tax office of which Rs9.97 billion was deposited in May 2016 and the remaining Rs13.6 billion on Sunday. Of this amount, Rs2.1 billion covered the fine imposed on the company by tax office for delaying the tax payment.

“Telia now has the option of paying the tax on its own or jointly with Ncell,” said LTO official. If Telia chooses first option, it will have to pay around Rs61.61 billion. If it chooses the second option, it will have to pay around Rs48.13 billion in total. This amount includes fine and interest.

According to the LTO official, the move of Telia on the modality it will choose for fulfilling tax obligation in Nepal will be based on its agreement with Axiata. 

With the formal correspondence, the LTO under the Inland Revenue Department has initiated the process of determining total taxable amount in the biggest corporate deal in the history of Nepal. 

Meanwhile, issuing a statement in the first  week of April Telia had stated that it is not obliged to file a tax return or deposit tax on sales of the Nepali telecom company to the authorities here. 

On April 3, Telia had received a letter from the Nepali tax authority, requesting submission of a tax return on divestment of Ncell’s shares. “Telia’s position has not changed [on this issue], because there is no obligation to file a tax return. 

Also, Telia has no tax obligation in Nepal on the foreign part of the transaction,” a statement issued by the company had stated. “Instead, taxes should be declared in Norway, which is the home country for [seller] TeliaSonera Norge Nepal Holding AS (TSNN), which Telia co-owns with Visor.”