Analysts uncertain of success rate for Axiata’s Ncell appeal

KUCHING: Analysts are still uncertain of the likelihood of success for Axiata Group Bhd subsidiary Ncell Private Limited’s ( Ncell) appeal against Nepal’s capital gains tax (CGT) demand of 39 billion Nepalese rupees (RM1.5 billion).

In a media statement, Axiata confirmed the submission of a writ petition by Ncell against the Large Taxpayer Office’s (LTPO) letter dated April 16, 2019.

“The LTPO’s letter was issued to the company as a follow-up to the full written Order of the Supreme Court (SC) on April 9, 2019, which relates to its oral Order dated February 6, 2019 on a public interest litigation (PIL) filed by a group of Nepali individuals,” the statement read.

“Ncell had on April 21, 2019 filed a Writ of Certiorari, Prohibition and Mandamus to the SC against the LTPO, Inland Revenue Department of Nepal and the Ministry of Finance of Nepal. The Ncell Application was accepted by the SC.”

“Ncell’s writ to the SC asserts that the LTPO has not complied with the procedure as stated in the country’s Income Tax Act for making a tax assessment and has instead used the SC’s Order dated April 9, 2019 to substitute the amount that the LTPO had previouslyassessedforTeliaSonera Norway Nepal Holdings AS and levied it on Ncell.”

AmInvestment Bank highlighted that according to the Himalayan Times, the CGT payable is NPR62.6 billion, of which Axiata has already paid instalments of NPR23.3 billion, including late interest charges.

The research firm estimated that this could raise Axiata’s financial year 2019 forecast (FY19F) net debt/earnings before interest, tax, depreciation and amortisation ( EBITDA) to 1.7- fold from 1.6fold.

“If the group were to make a provision, Axiata’s FY19F net profit of RM1.3 billion could reverse to a loss of RM200 million,” AmInvestment Bank said.