Kathmandu-WorldLink, Nepal’s biggest fixed broadband internet service provider, has been found to have dodged taxes in several ways.

Initially, authorities thought the company had avoided fees and royalties. Now, they’ve discovered tax evasion on income tied to the same categories.

Even though the Finance Act has rules about fees and royalties, WorldLink managed to skip paying them. Later, they did pay almost Rs 2 billion under those headings.

But, they didn’t pay the taxes owed on the same income. After a thorough look, the Revenue Investigation Department put together a report saying WorldLink had evaded over Rs 3 billion in taxes.

The Finance Act lets 50 percent of internet service maintenance charges go free from telecommunications fees.

WorldLink used this to argue that royalties and fees didn’t apply to that amount. But investigators found that the company used fee exemptions on more than half of those charges.

Authorities also found that WorldLink didn’t pay enough income tax and VAT on this amount. The investigation continued after the Inland Revenue Department pointed out some problems in their first look.

After the Supreme Court said that rural telecommunications fees and royalties had to be paid, the Nepal Telecommunications Authority asked other agencies to look into taxes and accounting related to this income.

After that, investigators figured out that the company had evaded taxes and penalties totaling Rs 7 billion.

Officials are planning to file a case aiming for over Rs 3 billion as the main amount, plus an equal amount in penalties, bringing the total to Rs 7 billion.

Sources at the Lalitpur District Government Attorney’s Office mentioned that the department has already sent the case file to get an opinion on registering it.

Office sources have also mentioned that the file has been sent to the Office of the Attorney General for their opinion. Once the approval is received, the department will move forward with filing charges of tax evasion.

The Telecommunications Act mandates that service providers put aside 4 percent of their yearly income as royalties and 2 percent into the Rural Telecommunications Fund.

The rules specify how income is classified. Gross income doesn’t include service tax, VAT, or income tax. The 4 percent and 2 percent apply to that gross income.

Internet service providers charge customers a monthly maintenance fee, which is shown separately on their bills. On average, this fee makes up about 40 percent of the total income, depending on the company. For every Rs 100 in revenue, around Rs 40 comes from this charge.

When reporting this income, WorldLink not only missed out on royalties but also service fees. Income tax and VAT should have been collected on this amount as well.

Nepal Telecommunications Authority Chair Bhupendra Bhandari noticed this in an initial analysis. Bhandari, who used to advise the communications minister, also encouraged the investigation through the minister.

There’s also a separate investigation happening into WorldLink’s misuse of foreign currency and tax evasion. However, it’s moving slowly because it needs cooperation from other countries, and Nepal hasn’t signed the necessary agreements yet.