Tag: Concentrate

Coca-Cola in $174 million tax dispute with the ATO

Coca-Cola in $174 million tax dispute with the ATO

According to various articles in Australian media, Coca-Cola is now defending itself in a case pending before the Federal Court over unpaid withholding tax on royalties received from Coca-Cola Amatil Australia – a local bottler and distributor in which Coca-Cola has a minority shareholding. The case is very similar to that against PepsiCo, where the Federal Court, in a judgment dated 30 November 2023, found PepsiCo liable for additional taxes and penalties. According to the Australian Tax Office, Coca-Cola licensed intangibles (trademarks, branding etc.) to Coca-Cola Amatil Australia, but misclassified payments made under this agreement as being for soft drink-concentrate only in order to avoid paying withholding tax on royalties. Coca-Cola shifted around $435 million in profits overseas and is liable for $174 million in diverted profits tax ... Read more
Australia vs PepsiCo, Inc., November 2023, Federal Court 2023, Case No [2023] FCA 1490

Australia vs PepsiCo, Inc., November 2023, Federal Court 2023, Case No [2023] FCA 1490

At issue was the “royalty-free” use of intangible assets under an agreement whereby PepsiCo’s Singapore affiliate sold concentrate to Schweppes Australia, which then bottled and sold PepsiCo soft drinks for the Australian market. As no royalties were paid under the agreement, no withholding tax was paid in Australia. The Australian Taxation Office (ATO) determined that the payments for “concentrate” from Schweppes to PepsiCo had been misclassified and were in part royalty for the use of PepsiCo’s intangibles (trademarks, branding etc.), and an assessment was issued for FY2018 and FY2019 where withholding tax was determined on that basis. The assessment was issued under the Australian diverted profits tax provisions. The assessment was appealed to the Federal Court in February 2022. Judgment of the Court The Federal Court ruled in favor of the tax authorities. Following the decision of the Court, the ATO issued an announcement concerning the case. According to the announcement it welcomes the decision. “This decision confirms PepsiCo, Inc ... Read more
Spain vs "X Beverages S.A.", October 2013, TEAC, Case No 00/02296/2012/00/00

Spain vs “X Beverages S.A.”, October 2013, TEAC, Case No 00/02296/2012/00/00

“X Beverages S.A.” had entered into an agreement with the ABCDE Group for the use of concentrate and trademarks for the production and sale of beverages in Spain, but according to the agreement, “X Beverages S.A.” only paid for the concentrate. Following an audit for the financial years 2005-2007, the tax authorities issued an assessment which considered part of the payment to be royalties on which withholding tax should have been paid. Court’s Judgement The Court agreed that part of the payment could be qualified as royalties, but the assessment made by the tax authorities had been based on secret comparables – leaving the taxpayer defenceless – and on this basis the Court annulled the assessment. Excerpts “The taxpayer itself seems to recognize that the so-called “Contract of …” contains both a distribution contract and a trademark assignment contract when it says on page 127 of its statement of allegations “Indeed, this authorization of use is necessary to be able ... 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 Spain Supreme Court 3582-2003 ... Read more