Tribunal issues provisional measures order in favour of Axiata in Nepal tax dispute

by TMR/ pic by TMR FILE

AXIATA Group Bhd yesterday announced that the International Centre for the Settlement of Investment Disputes (BIT Arbitration) had granted provisional orders against tax payment judgement related to its investment in Nepal.

The tribunal’s arbitration proceedings were commenced by Axiata Investments (UK) Ltd (Axiata UK) and Ncell Pte Ltd.

The tribunal had granted Axiata UK and Ncell provisional measures including restraining Nepal, its organs, agencies and officials, the Large Taxpayers Office (LTPO) and the Inland Revenue Department (IRD) from taking any steps to enforce the demand letter served by the LTPO against Ncell dated Dec 6, 2019, that demanded Ncell to pay NPR22.45 billion (RM818.4 million) in allegedly outstanding capital gains tax (CGT).

The tax including interest and penalties, was in connection with the sale by TeliaSonera Norway Nepal Holdings AS to Axiata UK of 100% of the share capital of Reynolds Holdings Ltd in 2016.

The tribunal also ordered with immediate effect that related parties could not take any steps which would alter the status quo between Axiata UK, Ncell and Nepal or aggravate the present dispute.

Axiata UK in a statement said Nepal and its agencies and officials (including the LTPO and the IRD) are obliged under international law to comply with the Provisional Measures Order.

“In the BIT Arbitration, Axiata UK and Ncell, will argue, among other things, that the act of imposing CGT in connection with the transaction contravenes Nepal’s international law obligations under the BIT,” the company said.

Axiata said in a statement that Axiata UK and Ncell will seek remedies including restitution of sums already paid, a permanent injunction against further attempts to collect CGT from Ncell in connection with the transaction and damages for all losses suffered in consequence of Nepal’s unlawful conduct.

“Axiata and Ncell have made significant contributions to the socio-economic development of Nepal. As the country’s largest taxpayer, Ncell has contributed NPR 210.68 billion in taxes as of last fiscal year 2018/2019 since its inception,” the company said.

Ncell, both directly and indirectly, supports 93,883 jobs and connects over 16.66 million customers across the networks.

Under its corporate social responsibility ambit, Ncell has invested more than NPR 700 million in various social projects identified as critical to the nation to include education, health, disaster management and environment.

“Axiata and Ncell remain fully committed to serving their customers in Nepal and will take all available actions to avoid any disruptions to services and operations in consequence of the dispute with the government of Nepal,” the company added.

Axiata purchased an 80% stake in Ncell from TeliaSonera for US$1.36 billion (RM5.63 billion) in 2015. In April this year, the Supreme Court of Nepal ordered Axiata and Ncell to pay a capital gains tax of NPR39.06 billion over the acquisition.

Last month, the Supreme Court halved the amount to NPR21.1 billion after Ncell appealed against the order. However, the court maintained that Ncell will remain liable for the tax payment. — by TMR