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Home»Editor's Pick»The Collapse of Ncell-Axiata’s $500 Million Claim Against the Nepal Government
Editor's Pick

The Collapse of Ncell-Axiata’s $500 Million Claim Against the Nepal Government

June 18, 20233 Mins Read
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NCELL
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The big telecom company Ncell, currently owned by the Axiata Group, recently faced a major setback. They had a big money dispute of $500 million (~Rs. 66 Billion) with the Nepal Government, but their claim fell flat. All this trouble is over taxes that should have been paid when Axiata bought Ncell from another company, Telia Sonera, back in 2016.

To avoid taxes in Nepal, the deal was set up in a way that another company’s shares, based in the tax-friendly country of Saint Kitts and Nevis, were transferred instead. This company, Reynolds Holdings Limited, was the main holding company for Ncell. So technically, Ncell’s shares in Nepal were not touched, but in reality, control of Ncell moved over to Axiata.

Following the deal, people accused TeliaSonera of trying to avoid taxes. But since Ncell is based in Nepal, the company had to deal with the tax bill, which came out to be a whopping Rs. 35.91 Billion.

This matter dragged on for a long time in the court and finally reached the Supreme Court of Nepal. After that, Axiata Group, the new owner of Ncell, decided to take the matter to the International Centre for Settlement of Investment Disputes (ICSID) and asked for damages of $420 million (~Rs. 55.54 Billion). If the Nepal Government lost, they would have had to pay around $500 million (~Rs. 66 Billion) including interest & expenses.

The biggest mistake that led to Ncell’s claim falling flat was their reliance on verbal assurances. Ncell claimed that the then Prime Minister and the Director General of the Inland Revenue Department that there will be no tax implications in Nepal, but they didn’t get anything in writing.

Despite warnings from experts about potential tax demands from this kind of offshore share deal, Ncell didn’t request for a formal ruling. This turned out to be a big mistake and likely caused the international body to rule in favor of the Nepal Government.

Now, even though Ncell’s big claim did not work out, the Nepal Government will still have to pay some money as compensation, but we don’t know how much yet.

This big event might help clear up confusion around how offshore transactions are taxed in Nepal. It’s a big moment for the country’s business world. Also, Nepal Government’s involvement in this case and the victory should give confidence to investors.

In short, what started as a big financial problem for the Nepal Government turned into a major point of clarification in tax laws and could make Nepal’s standing in the international business world stronger. Now, we wait to see what impacts this legal battle will have on the future of business and investments in Nepal.

Ncell’s defeat highlights the need for transparency and documentation in cross-border mergers and acquisitions, especially in developing nations working to strengthen tax regimes. With proper policy and oversight, governments can balance investor interests with the need to fund programs and services for citizens. For Nepal, the win signifies an important step toward both.

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Darshan Parajuli
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Darshan is a Kathmandu-based tech journalist with over a year of experience in the field. He has a passion for exploring the latest developments in the world of technology, the newsroom, and storytelling. From cutting-edge technology to groundbreaking software, Darshan is dedicated to bringing his readers the most up-to-date and informative news in the industry. He is constantly striving to deliver engaging and insightful content to his audience. "

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