DUBAI, Dec 21 (Reuters) - Zain Iraq will pay $94 million to settle a tax case related to the 2007 acquisition of rival operator Iraqna from Egypt’s Orascom Telecom, its Kuwaiti parent Zain said on Wednesday.
Iraq’s tax authority, the General Commission of Taxes (GCT), claimed Zain Iraq, the country’s biggest mobile network operator by subscribers, owed $187 million in capital gains tax due on its $1.2 billion purchase of Iraqna.
Unusually, the government tried to levy the capital gains tax on Zain Iraq as the asset buyer, rather than on the seller, Egypt’s Orascom Telecom, which was later renamed Global Telecom .
Under the settlement with the GCT and the country’s Ministry of Finance the Iraqi authorities will drop its claims against Zain Iraq, cancel associated owed interest and penalties, and allow Zain Iraq to appeal against additional tax assessments on itself and Iraqna for the respective periods of 2004-2010 and 2004-2007, Zain said in a statement.
Restrictions on Zain Iraq’s shares and its bank accounts, which the authorities had frozen, will also be lifted. Part of the settlement figure will be paid using cash in these bank accounts, the statement added, without specifying an amount.
According to its third-quarter results statement, Zain Group had bank balances worth 128 million dinars ($418.3 million) blocked due to various legal cases in Iraq, including the claim against capital gains.
In a separate bourse statement Zain Group said it would book an impairment charge of $42.6 million as a result of the settlement. ($1 = 0.3060 Kuwaiti dinars) (Reporting by Alexander Cornwell; Editing by David French, Greg Mahlich)