Apex court clears way for Ncell profit repatriationThe Supreme Court on Sunday cleared the way for telecom company Ncell to repatriate its dividend from Nepal.
The Supreme Court on Sunday cleared the way for telecom company Ncell to repatriate its dividend from Nepal.
Upholding the interim order issued by Justice Dambar Bahadur Shahi on December 18, a division bench of Justices Om Prakash Mishra and Kedar Prasad Chalise allowed repatriation of profits earned by the telecom service provider in the country.
The government had barred dividend repatriation until the issue of capital gains tax related to the Ncell buyout deal is settled.
Stating that obstruction of dividend repatriation would adversely affect the company and its shareholders, the court directed the government authorities not to obstruct the process.
The bench ruled that the Foreign Investment and Technology Transfer Act (2049) 5 (2) and Foreign Exchange Act (2019) 10 (C) 1 allow a foreign company to send back profits earned on its investment.
Acting upon the Large Taxpayers Office (LTO)’s request, the Nepal Rastra Bank on July 10 had issued directives to bank and financial institutions not to provide foreign exchange facilities to the companies associated with Ncell—Axiata and Reynolds Holdings Limited, among others. Reynolds Holding was TeliaSonera’s wholly-owned subsidiary, registered at Saint Kitts and Nevis, a tax haven.
“With Sunday’s Supreme Court ruling, the door has opened for Ncell to repatriate its dividend,” said a senior NRB official. The company has accrued Rs72 billion
in profits from its operations in Nepal.
In April 2015, Telia, a Sweden-based telecom company, sold 60.4 percent stake in Ncell to Axiata, the Malaysia-based telecom giant. Axiata also acquired another 19.6 percent stake in Ncell from SEA Telecom Investments BV, a company owned by the Kazakhstan-based Visor.
Axiata had acquired these stakes for Rs144 billion. Ever since the deal, the government has maintained that tax will be levied on the transaction while TeliaSonera had argued the deal is not taxable in Nepal.
The LTO in June concluded that the government needs to recover Rs60.71 billion in capital gains tax from the Ncell buyout deal. Following pressure from the government, Ncell has so far deposited Rs23.6 billion, of which Rs9.97 billion was paid in May 2016 and the remaining Rs13.6 billion in the first week of June.
The apex court also ruled that legal issues related to determining capital gain tax in the share transfer between Nepali and foreign companies should be decided by a full bench.