The Nepal Government has won a landmark tax dispute against Ncell, the country’s largest telecom company. The dispute centered on whether Ncell should have paid taxes when it was acquired by the Axiata Group in 2016.
Ncell had argued that it was not liable to pay taxes because the acquisition was structured as a transfer of shares in a tax-friendly country, Saint Kitts and Nevis. However, the Nepal Government argued that the true purpose of the transaction was to avoid taxes in Nepal.
The case dragged on for several years, eventually reaching the International Centre for Settlement of Investment Disputes (ICSID). In a ruling issued on June 9, 2023, the ICSID sided with the Nepal Government, finding that Ncell had indeed avoided taxes by structuring the transaction in this way.
The victory is a major win for the Nepal Government, as it sends a clear message that the country will not tolerate tax avoidance. It is also a positive development for the country’s business climate, as it will help to attract foreign investment.
The case also highlights the importance of transparency and documentation in cross-border mergers and acquisitions. If Ncell had been more transparent about the true purpose of the transaction, it is likely that the Nepal Government would have been able to collect the taxes that it was owed.
The win for the Nepal Government is a significant step forward in the country’s efforts to strengthen its tax regime. With proper policy and oversight, the government can balance investor interests with the need to fund programs and services for citizens.
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