In the case of the Coca-Cola Vietnam, which was decided in court on 27 November 2025, the tax authority found that Coca-Cola Vietnam’s related party transactions had not been priced at arm’s length. Coca-Cola Vietnam had applied a profit-based method similar to TNMM. In its local transfer pricing file for the period from 2007 to 2015, the company’s own comparables produced an arm’s length interquartile range. However, for several years, particularly in 2007, 2011 and 2012, Coca-Cola Vietnam’s results were below that range. The low profitability was driven by intragroup purchases of key ingredients, especially concentrate imported from other group companies. The tax authority used the company’s own benchmark to price the controlled transactions and increased the taxable profit for those years by approximately VND 362 billion. The assessment was upheld in court. While a transcript of the case has yet to be published, the Vietnamese Ministry of Finance has issued an official statement. Click here for English Translation Click ... Read more

The transaction concerned management services provided by CCB Management Services GmbH & Co KG, an Austrian group company, to Coca-Cola HBC under a long-term management services agreement in 2004. Coca-Cola HBC deducted the invoiced management fees as tax expenses and reported a tax loss for the 2004 corporate income tax period. However, the tax authorities concluded that a substantial portion of the management service costs were not tax-deductible. They treated the Austrian service provider as a related party, ruling that the pricing and allocation of services did not comply with the arm’s length principle under the Income Tax Act and Article 9 of the Austria-Slovakia tax treaty. Based on this, they made transfer pricing adjustment, increased the tax base and reduced the reported tax loss. They also took the view that applying the tax treaty allowed a longer limitation period for assessing tax. Coca-Cola HBC challenged the decision, arguing that the right to assess tax had expired under the five-year ... Read more

Following an audit, the tax authorities assessed an additional tax liability against Coca-Cola HBC Česko a Slovensko s.r.o., a decision that was upheld by the Financial Directorate on 4 August 2020 following an appeal. Coca-Cola HBC Česko challenged this decision, arguing that Article 9 of the double taxation treaties with the Czech Republic, Austria and the Netherlands could not be applied directly without implementing legislation, and that the tax authority had wrongly invoked it. They also claimed that Slovak income tax law did not permit the disputed transfer pricing adjustments since foreign affiliates could not be considered “foreign dependent persons” under the law. The company also claimed that the tax authority had improperly reclassified intra-group loans as equity contributions, had wrongly denied interest deductibility and had misapplied allocation keys for management service costs. Coca-Cola also objected to procedural defects, including the use of new economic analyses introduced at the appeal stage without prior notification, which it claimed violated the principle ... Read more

Allied Beverage Company Ltd. in July 2016 entered into a Service Agreement with The Coca-Cola Export Corporation (‘TCCEC’), to provide brand marketing, market research and other related services for TCCEC, which is incorporated and located in the United States of America. The brand marketing services however, were conducted in Uganda i.e. played through adverts on a Ugandan radio station to wit; 91.3 Capital FM among others. The revenue service then carried out a Value Added Tax (VAT) assessment of UGX 17,400,459,133 on Allied Beverage for the period 2016 to 2020 on the basis that the services rendered by Allied Beverage to TCCEC are consumed locally and thus attract VAT of 18%. Allied Beverage objected to the assessment and later applied to the Tax Appeals Tribunal, which dismissed their application. An appeal was then filed with the High Court. Judgment of the High Court The High Court overturned the decision of the Tax Appeals Tribunal and ruled in favour of Allied ... Read more

The Central Company for the Production of Soft Drinks Ltd. holds exclusive rights to distribute Coca-Cola products in Israel. The dispute arose when the tax authorities classified part of the payments made by the company to Coca-Cola as royalties for the use of Coca-Cola’s trademarks and intellectual property, making them subject to withholding tax. The company appealed to the district court, arguing that no portion of the payments constituted royalties. Instead, they argued that the payments were solely for the concentrates utilized in the production of beverages and that the tax authority had not previously classified them as royalties. Judgment The court ruled that the payments involved the use of Coca-Cola’s intellectual property and were therefore correctly classified as royalties by the tax authorities. It dismissed the company’s appeals for the years 2010-2017 and upheld the tax assessments, requiring the company to pay the withholding taxes on the royalty payments. Excerpts in English “15. Moreover, even if I assume in ... Read more

In TC opinion of November 18, 2020 and TC opinion of November 8, 2023, the US Tax Court agreed with the US tax authorities (IRS) that Coca-Cola’s US-based income should be increased by $9 billion in a dispute over royalties from its foreign-based licensees. The principal holding was that the Commissioner did not abuse his discretion in reallocating income to Coca-Cola using a “comparable profits method” (TNMM) that treated independent Coca-Cola bottlers as comparable parties. However, one question remained. Coca-Colas’s Brazilian subsidiary paid no actual royalties to Coca-Cola during 2007–2009. Rather, it compensated Coca-Cola for use of its intangibles by paying dividends of $886,823,232. The court held that the Brazilian subsidiary’s arm’s-length royalty obligation for 2007–2009 was actually about $1.768 billion, as determined by the IRS. But the court held that the dividends remitted in place of royalties should be deducted from that sum. This offset reduces the net transfer pricing adjustment to petitioner from the Brazilian supply point to ... Read more

INDEGA filed a tax return for FY2011 in which it concluded that its related party transactions had been conducted at arm’s length. Transfer prices had been determined using a TNMM with the operating margin over operating costs and expenses (ROTC) as the profit level indicator (PLI). Following an audit, the Colombian tax authorities issued a notice of additional taxable income. The notice was based on an assessment, where they had used return on capital employed (ROCE) instead of ROTC as the PLI. An appeal was filed with the Administrative Court, which later ruled in favour of INDEGA. The tax authorities then appealed to the Council of State. Judgment of the Court The Counsel of State upheld the decision of the Administrative Court and dismissed the tax authorities’ appeal. Excerpt in English “The adjustments that may be made in the context of the application of the transfer pricing regime do not entail disregarding the accounting reality of the applicant as the ... Read more

In TC opinion of 18 November 2020 the US Tax Court agreed with the US tax authorities (IRS) that Coca-Cola’s US-based income should be increased by $9 billion in a dispute over royalties from its foreign-based licensees. The principal holding was that the Commissioner did not abuse his discretion in reallocating income to Coca-Cola using a “comparable profits method” (TNMM) that treated independent Coca-Cola bottlers as comparable parties. However, one question remained. Coca-Colas’s Brazilian subsidiary paid no actual royalties to Coca-Cola during 2007–2009. Rather, it compensated Coca-Cola for use of its intangibles by paying dividends of $886,823,232. The court held that the Brazilian subsidiary’s arm’s-length royalty obligation for 2007–2009 was actually about $1.768 billion, as determined by the IRS. But the court held that the dividends remitted in place of royalties should be deducted from that sum. This offset reduces the net transfer pricing adjustment to petitioner from the Brazilian supply point to about $882 million. Thus, the issue to ... Read more

In a November 2020 opinion the US Tax Court agreed with the IRS that Coca-Cola’s US-based income should be increased by $9 billion in a dispute over royalties from its foreign-based licensees. Coca-Cola filed a Motion to Reconsider June 2, 2021 – 196 days after the Tax Court had served its opinion. Judgment of the tax court The Tax Court denied the motion to reconsider. There is a 30-day deadline to move for reconsideration and the court concluded that Coca-Cola was without a valid excuse for the late filing and that the motion would have failed on the merits in any event ... Read more

Coca Cola, a U.S. corporation, was the legal owner of the intellectual property (IP) necessary to manufacture, distribute, and sell some of the best-known beverage brands in the world. This IP included trade- marks, product names, logos, patents, secret formulas, and proprietary manufacturing processes. Coca Cola licensed foreign manufacturing affiliates, called “supply points,” to use this IP to produce concentrate that they sold to unrelated bottlers, who produced finished beverages for sale  to distributors and retailers throughout the world. Coca Cola’s contracts with its supply points gave them limited rights to use the IP in performing their manufacturing and distribution functions but gave the supply points no ownership interest in that IP. During 2007-2009 the supply points compensated Coca Cola for use of its IP under a formulary apportionment method to which Coca Cola and IRS had agreed in 1996 when settling Coca Cola’s tax liabilities for 1987-1995. Under that method the supply points were permitted to satisfy their royalty ... Read more

Coca Cola collects royalties from foreign branches and subsidiaries for use of formulas, brand and other intellectual property. Years ago an agreement was entered by Coca Cola and the IRS on these royalty payments to settle an audit of years 1987 to 1995. According to the agreement Coca-Cola licensees in other countries would pay the US parent company royalties using a 10-50-50 formula where 10% of the gross sales revenue is treated as a normal return to the licensee and the rest of the revenue is split evenly between the licensee and the US parent, with the part going to the US parent paid in the form of a royalty. The agreement expired in 1995, but Coca-Cola continued to use the model for transfer pricing in the following years. Coca-Cola and the Mexican tax authorities had agreed on the same formula and Coca-Cola continued to use the pricing-formula in Mexico on the advice of Mexican counsel. In 2015, the IRS ... Read more

At issue was deductions of management fees paid by a Coca-Cola s.r.o. – a Slovakian subsidiary of the Coca-Cola group – to Coca Cola Management Services GmbH & Co. AG. in Switzerland. The assessment issued by the tax authorities was based on the OECD Guidelines on Transfer Pricing for Multinational Enterprises and Tax Administration, which according to the tax authorities was a generally accepted supplementary interpretative tool to Art. 9 of the Treaty on the avoidance of double taxation within the meaning of the Vienna Convention on contract law. Documents and information submitted in the course of a tax inspection showed that in addition to the fee for the provision of management services, Coca-Cola s.r.o. also paid for the provision of employment services and IT services. In total, payments for provision of services in 2005 was € 1,463,385.46. Judgment of the Supreme Court In regards to MTC article 9 and application of the OECD Transfer pricing guidelines in Slovakia the ... Read more

The Coca-Cola Company submitted a petition to the U.S. Tax Court, requesting a redetermination of the deficiencies in Federal income tax for the years ended December 31, 2007, 2008 and 2009, as set forth by the Commissioner of Internal Revenue in a Notice of Deficiency dated September 15, 2015. The total amount in dispute is over $3.3 billion for the 3-year period. Major issues in the dispute include the method used to allocate profit to seven foreign subsidiaries, which use licensed trademarks and formulas to carry out the manufacture and sale of beverage concentrates in markets outside of the United States, as well as the application of correlative adjustments for foreign tax credits. The Coca-Cola Company claims that it used the same allocation method that had been reviewed and approved by the Internal Revenue Service during audits of tax years from 1996 through 2006, the same that was established in a Closing Agreement with respect to the 1987 through 1995 ... Read more

Coca-Cola Embonor S.A. had deducted interest payments on an loan to a related party in the Cayman Islands. Following an audit, the tax authorities concluded that the interest payments were not necessary expenses to produce income, as required by Article 31 of the Chilean Income Tax Law, and were therefore not deductible for tax purposes. An appeal was made to the Tax Court, which ruled in favour of the tax authorities.  Coca-Cola Embonor S.A. then appealed to the Court of Appeal which upheld the decision of the Tax Court. An appeal was then filed with the Supreme Court. Judgment The Supreme Court upheld the decision of the Court of Appeal and decided in favour of the tax authorities. The Court determined that the taxpayer failed to prove a direct relationship between the income and expenses, particularly since the related party in the Cayman Islands only reported losses and did not generate taxable income in Chile. ​ Click here for English ... Read more

Refrescos Envasados, S.A. – a Coca-Cola subsidiary in Spain – bought soft drink concentrate manufactured by Coca-Cola companies in Ireland and France. According to the tax authorities the prices paid for the concentrate were above market prices. Hence, an assessment was issued where the prices for the concentrate had been lowered resulting in additional taxable profits. In regards to the tax assessment, the tax authorities argued that they were not bound by the valuation carried out for customs purposes. Judgment of the Supreme Court According to the Supreme Court, the pricing applied for the purpose of calculating the customs is linked to the pricing applied for transfer prices purposes. The tax authorities can choose a transfer pricing method, but the method chosen must be used for both CIT and customs purposes. Click here for english translation Click here for other translation ... Read more