The Commission for Investigation of Abuse of Authority (CIAA) has halted its probe into the decision of the Nepal Rastra Bank to let Ncell, a private telecom operator, to repatriate its dividend.

Between mid-August and mid-September 2016, the central bank had allowed Ncell to repatriate dividend worth Rs8.36 billion earned in the fiscal year 2011-12.

The NRB decision had run into a controversy as it was against the directive of the Parliamentary Finance Committee of the erstwhile Legislature-Parliament for the government not to permit Ncell to increase its paid-up capital and to launch any commercial schemes until the issue of capital gain tax was settled.

The tax authority says that Ncell’s former parent company, the Sweden-based TeliaSonera which exited Nepal in April 2015 by selling its entire stakes to the Malaysian Axiata for Rs144 billion, should pay the capital gain tax from the profit it made while selling its stake.

But the Telia refused to comply, giving rise to a controversy whether Ncell should be allowed to repatriate its dividend.

The CIAA decided on November 13, 2017 not to pursue probe into the case arguing that the NRB decision had followed the due legal procedure while the Large Taxpayers’ Office (LTO) also determined the revised tax amount to be paid from the Ncell buyout deal.

“An investigation regarding this has now been put on hold,” said CIAA Spokesperson Padam Prasad Pandey.

As per the CIAA decision, it is not necessary to do anything on the case as the NRB took a decision based on the documents that Ncell should submit to the regulatory authorities, such as the licence for operation, entry of foreign direct investment accounted at the NRB, audit report, decision of the Ncell annual general meeting to distribute dividends, tax clearance certificate and proof of necessary fees paid by the company to the regulator.

On the other hand, the LTO determining Rs60.71 billion in capital gains tax to be recovered from the Ncell buyout deal in June 2017 and the private  sector telecom giant paying an additional Rs13.6 billion as capital gain tax in the  same month after first depositing Rs9.97 billion, have also been taken into consideration for ending the probe.

Earlier, the NRB had claimed that it need not take approval from the regulatory bodies including the Department of Industry to let companies established through foreign investment repatriate their dividend while also claiming that it decided to let Ncell take back profits after necessary documents were submitted.

Although the anti-graft body has ended its probe for now, it has provided different suggestions to the government agencies and the central bank. The CIAA has asked the Finance Ministry to take timely decisions on taxation when the taxpayer seeks prior order, determine entire tax liability of the taxpayer in time and take appropriate measures where the government could recover the set tax amount.

The Industry Ministry has been advised to create an environment conductive to foreign direct investment and ensure swift investment management. The Ministry of Information and Communications has been directed to see if the telecom operators are following the terms that they agreed to while acquiring the licence.

The central bank has been asked to coordinate with other regulatory bodies while allowing companies having foreign investment to repatriate dividend with foreign exchange. In a further development, the Supreme Court on December 24 last year cleared the way for Ncell to repatriate its dividend from Nepal.

Citing the Foreign Investment and Technology Transfer Act (2049) 5 (2) and Foreign Exchange Act (2019) 10 (C) 1, the court issued an order allowing Ncell to send back profits earned on its investment. 

The government had barred dividend repatriation until the issue of capital gains tax related to the Ncell buyout deal was settled.