Summary:
The Nepalese government has made a special provision in the 2025/26 budget to waive interest and penalties amounting to around NPR 1.5 billion for Bottlers Nepal Terai Limited, a company producing Coca-Cola in Nepal. This move is part of the Finance Bill’s Section 30, which allows waiver of interest and fees on outstanding income tax if the tax is paid by mid-July 2025.
Background:
- Bottlers Nepal Terai Limited, under Bottlers Nepal Limited, faced multiple tax assessments due to ownership changes involving Coca-Cola Sabco Asia's shares.
- The company was subjected to double taxation based on two different sections of the Income Tax Act, 2058 (Sections 57 and 95(k)), leading to overlapping tax liabilities on the same transaction.
- This ownership change was not reported initially to the Nepalese government, causing tax evasion allegations and subsequent investigations by the Revenue Investigation Department.
- The department found tax evasion worth NPR 124 million, with additional interest and penalties increasing the amount to nearly NPR 382 million.
- The Large Taxpayer Office further imposed additional corporate taxes of about NPR 542 million.
- Legal disputes ensued, with the company appealing up to the Supreme Court.
Government Rationale:
Officials said the special waiver is due to the hardship caused by double taxation on a multinational company, considering it an unfair burden. The waiver only applies to interest and penalties, not the principal tax amount. Officials also cited that such relief is not uncommon in finance bills but this case is notable because it targets a specific company.
Criticism:
Tax experts criticize the double taxation as legally correct but unjust. They argue that taxing the same transaction twice is unfair and that the government’s narrow interpretation of the law resulted in this problem. The tax waiver via the budget is seen by some as an attempt to rectify this injustice after the fact.
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