Oracle Australia made sublicence fee payments to Oracle Ireland for use of copyrighted software. The Australian Tax Office assessed these as royalties subject to withholding tax under the Australia-Ireland DTA. After the Federal Court refused a stay pending MAP proceedings, Oracle appealed. In October 2025, Australia's Full Federal Court overturned that decision and granted the stay, recognising the relevance of the mutual agreement procedure under the treaty ... Read more

PepsiCo and Stokely-Van Camp, US-resident entities, licensed intellectual property to an Australian bottler without charging royalties, embedding value in concentrate prices paid to a local subsidiary. The Australian Commissioner assessed withholding tax on part of those payments as royalties and invoked general anti-avoidance rules. Australia's High Court ruled in favour of the taxpayer in August 2025, rejecting both the royalty characterisation and the tax avoidance grounds ... Read more

Oracle Australia made sublicence fee payments to Oracle Ireland for enterprise software distribution rights. The Australian Tax Authority assessed these payments as royalties under the Australia-Ireland Double Tax Agreement, triggering withholding tax liability. Oracle initiated a Mutual Agreement Procedure and sought a stay in the Federal Court. In October 2024, the court evaluated the stay application by weighing prospects of success, balance of convenience, and public interest, deciding in favour of the tax authority ... Read more

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 ... Read more

PepsiCo's Singapore affiliate sold concentrate to Schweppes Australia under a royalty-free arrangement. The ATO assessed withholding tax for FY2018–2019, arguing the payments were partly royalties for PepsiCo's trademarks and branding. After the Federal Court ruled for the ATO in 2023, the Full Federal Court reversed that decision in 2024, finding the concentrate payments were not consideration for intellectual property use and no royalty component existed ... Read more

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

PepsiCo's Singapore affiliate sold concentrate to Schweppes Australia under a royalty-free arrangement, avoiding withholding tax on the use of PepsiCo's intangibles. The ATO assessed withholding tax for FY2018 and FY2019, arguing the payments were partly royalties, and also applied diverted profits tax provisions. Australia's Federal Court upheld the ATO's position in November 2023, marking the first judicial consideration of Australia's diverted profits tax ... Read more

The Australian Taxation Office (ATO) has issued draft Compliance Guidelines on intangible arrangements, PCG 2021/D4. These Guidelines will (when finalised)  set out the ATO’s compliance approach to international arrangements connected with the development, enhancement, maintenance, protection and exploitation of intangible assets, specifically, the potential application of the transfer pricing, general anti-avoidance rule (GAAR) and the diverted profits tax (DPT) provisions. The capital gains tax and capital allowances provisions will also be discussed in this Guideline where these may be considered alongside, or relevant to, the ATO’s transfer pricing, GAAR or DPT risk assessment. The draft Guidelines sets out ATO’s compliance approach to international arrangements connected with the development, enhancement, maintenance, protection and exploitation (DEMPE) of intangible assets and/or involving a migration of intangible assets. The Guidelines applies to Intangibles Arrangements and focuses on tax risks associated with the potential application of the transfer pricing provisions. It also focuses on other tax risks that may be associated with Intangibles Arrangements, specifically ... Read more

The ATO is currently reviewing international arrangements that mischaracterise intangible assets[1] and/or activities or conditions connected with intangible assets. The concerns include whether intangible assets have been appropriately recognised for Australian tax purposes and whether Australian royalty withholding tax obligations have been met. Arrangements that allocate all consideration to tangible goods and/or services, arrangements that allocate no consideration to intangible assets, and arrangements that view intangible assets collectively, or conceal intangible assets, may be more likely to result in a mischaracterisation. Where arrangements are between related parties, we are concerned about whether the: amount deducted by the Australian entity under the arrangement meets the arm’s length requirements of the transfer pricing provisions in the taxation law[2] functions performed, assets used and risked assumed by the Australian entity, in connection with the arrangement, are appropriately compensated in accordance with the arm’s length requirements of the transfer pricing provisions in the taxation law. These arrangements typically display most, if not all, of the ... Read more