Tag: Coca-Cola

US vs Coca Cola, October 2021, US Tax Court, T.C. Docket 31183-15

US vs Coca Cola, October 2021, US Tax Court, T.C. Docket 31183-15

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. Judgement 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
US vs Coca Cola, November 2020, US Tax Court, 155 T.C. No. 10

US vs Coca Cola, November 2020, US Tax Court, 155 T.C. No. 10

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
US vs Coca Cola, Dec. 2017, US Tax Court, 149 T.C. No. 21

US vs Coca Cola, Dec. 2017, US Tax Court, 149 T.C. No. 21

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
Slovakia vs Coca-Cola s.r.o., April 2015, Supreme Court of the Slovak Republic No. 2Sžf/76/2014

Slovakia vs Coca-Cola s.r.o., April 2015, Supreme Court of the Slovak Republic No. 2Sžf/76/2014

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 sas issued by the tax authorities 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. In regards to MTC article 9 and application of the OECD Transfer pricing guidelines in Slovakia the Supreme Court stated: “… the ... Read more

US v Coca-Cola, December 2015. US Tax Court

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
Spain vs. Refrescos Envasados S.A., November 2009, Supreme Court, Case nr. 3582/2003

Spain vs. Refrescos Envasados S.A., November 2009, Supreme Court, Case nr. 3582/2003

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. Judgement 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