The Australian Tax Office (ATO) has applied for special leave to appeal to the High Court of Australia against the Full Federal Court’s decision in PepsiCo, Inc. v Commissioner of Taxation [2024] FCAFC 86.
At issue was the ‘royalty-free’ use of intangible assets under an agreement whereby PepsiCo Singapore sold concentrate to Schweppes Australia. According to the ATO, part of the payments made by Schweppes Australia to PepsiCo Singapore were in fact royalties for the use of trademarks and trade names, which were subject to Australian withholding taxes. See also ATO’s draft ruling TR 2024/D1.
In June 2024, the Full Federal Court found that PepsiCo was not liable for royalty withholding tax and that the diverted profits tax (DPT) did not apply, overturning the previous decision of the Federal Court which, in a judgment dated 30 November 2023, had ruled in favour of the ATO and found PepsiCo liable for additional withholding taxes and penalties.