In one of the landmark verdict, Supreme Court (SC) on 6 February 2019, ordered Ncell to pay its outstanding capital gains tax (CGT) amounting NPR 61 billion (USD 535 million). The controversy emerged as the Government of Nepal did not receive the required CGT of 25% in the Ncell buy out deal between TeliaSonera (Swedish-Finish Company) and Axiata (Malaysian Company).
In April 2016, Axiata had acquired 80% of the Ncell share in a deal worth NPR 143 billion (USD 1.25 billion). The Income Tax Act of Nepal requires foreign investors to pay 25% in CGT. Of this amount, 15% is left at the company that was sold while the remaining 10 % should be paid by the seller. This means Ncell (the company) had to pay 15 % of the CGT while the remaining 10 % should have been paid by TeliaSonera (the seller), however, TeliaSonera exited Nepal without paying its share of the CGT and Axiata claimed that those taxes not to be under its responsibility. The key points in this case can be detailed as follows: 
|21 December 2015||Ncell sells Axiata Group|
|08 April 2016||Company shares sold
– 80% TeliaSonera Group
– 20% Govinda Shrestha
|12 April 2016||Govinda Shrestha pays CGT worth NPR 2.83 billion
Large Taxpayers Office (LTO) asks TeliaSonera Group to pay their share of CGT
|08 May 2016||Ncell, on behalf of TeliaSonera Group pays NPR 9.96 billion|
|27 June 2017||LTO based on expert team’s investigation report declares financial tax liability of NPR 60.71 billion|
|02 July 2017||LTO asks Nepal Rastra Bank (NRB) to restrict repatriation of Ncell dividend|
|17 December 2017||Ncell challenges the restriction on dividend repatriation at Supreme Court (SC)|
|18 December 2017||SC orders NRB and LTO to remove restriction|
|06 February 2019||SC orders Ncell to pay NPR 60.71 tax and additional interest and fines|
Following the announcement made by the SC, one of the onerous and marathon case on corporate credit tax has come to a conclusion. The verdict has also paved the way for the Government to collect the tax from Ncell and its parent company Axiata.
This is a special case in Nepal’s FDI scenario where two foreign investors traded ownership of a Nepal-based telecom company. There were debates on whether CGT should be imposed on the deal, as it was argued that the deal took place in a foreign land and the Income Tax Act does not have clear provisions on offshore deals. The case highlights the legal complexity of Foreign Direct Investment (FDI) in Nepal that can act as a demoralizing factor for the foreign investors—especially at a time when Nepal is about to organize foreign investment summit.
The aspired economic growth of Nepal is only possible if the domestic savings can be conduit to investment or the policies regarding FDI is unrestrained. The former is hard to achieve as our saving rate in low (gross fixed capital formation is 34% of GDP) and therefore, FDI must be encouraged by endorsing transparent and easy policies.