KUALA LUMPUR: Having been through a rough patch lately, Axiata Group Bhd has good news for its shareholders.

Last Friday, the telcommunications company (telco) announced that the Supreme Court of Nepal has ruled that Axiata’s Nepalese unit, Ncell Private Ltd, is liable to pay outstanding capital gains tax (CGT) of 21.1 billion Nepalese rupees (NPR) (approximately US$183.17 million or RM764.19 million).

This is on top of 23 billion NPR, including two billion NPR in interest and fines, that Axiata has already paid in two tranches.

Still, the total amount of taxes Ncell has to pay now — at 44 billion NPR — is less than the original total amount of 61 billion NPR.

Based on the original outstanding sum of RM1.45 billion, analysts earlier expected Axiata to make a massive provision in the current financial year ending Dec 31, 2019, that would have dragged Axiata into  the red with about RM400 million in losses .

Given the latest court ruling, however, the dent in Axiata’s earnings is likely to be smaller. Furthermore, the pressure on its balance sheet will also ease as Axiata will not have to gear up as much as it would have to, if it had to pay the initial outstanding sum of RM1.45 billion.

According to last Friday’s announcement, Axiata — citing the court’s full written judgement dated Nov 21, 2019 — said the court has stated that the prior tax amount assessed by the Large Taxpayers Office (LTPO) is to be reduced to the extent of fees purportedly levied under Section 120(a) of the Nepalese Income Tax Act.

This follows a writ petition filed against Nepali tax authorities LTPO and the Inland Revenue Department of Nepal seven months ago (April 22, 2019), after they demanded Ncell pay NPR39.06 billion in allegedly outstanding CGT. The latest judgement means the court deemed part of the earlier amount demanded was unlawful.

The CGT claim arose after Axiata, via its wholly-owned Axiata Investments (UK) Ltd, bought Reynolds Holdings Ltd from TeliaSonera Norway Nepal Holdings AS. Reynolds is Ncell’s immediate holding company.

The LTPO was supposed to collect the CGT from the seller.

However, since TeliaSonera did not have any presence in the country after the divestment of Ncell, the tax authority shifted the burden to Ncell, the transaction’s buying party.

“As one of Nepal’s largest taxpayers, Ncell has contributed more than NPR210 billion in taxes since its inception,” said Axiata.

“Ncell also, both directly and indirectly, supports 93,883 jobs and connects 17 million customers across our networks,” the company said, adding that both Axiata and Ncell remain fully committed to serving their customers in Nepal and will take all available action to avoid any disruption to services and operations in consequence of this dispute.

Shares of Axiata gained six sen or 1.4% at RM4.36 last Friday, valuing the company at RM39.95 billion. Over the past year, the telco has gained about 30% from RM3.35.