Ho Chi Minh City court rejects Coca-Cola Vietnam’s lawsuit against taxman

The ruling follows a comprehensive tax inspection launched in 2019, which reviewed Coca-Cola Vietnam’s operations from 2007 to 2015.

The General Department of Taxation concluded that the company’s previously reported losses needed to be adjusted downward by over VND762 billion ($29 million), and determined that more than VND471 billion ($17.8 million) in unpaid taxes had to be collected.

Including penalties and late payment fees, the total amount reached VND821.4 billion.

After its administrative complaint was rejected, Coca-Cola Vietnam filed a lawsuit against the taxman.

The case was heard on November 6 and resumed on Thursday.

During the recent hearing, the court examined inspection records, documents, and legal arguments from both sides.

The representative of the People’s Procuracy affirmed that the General Department of Taxation’s decision was well-founded and recommended the court dismiss Coca-Cola’s lawsuit.

The court ultimately upheld the tax authority’s decision in full.

Coca-Cola Vietnam said it respected the judicial process and the court’s ruling.

The firm added that it was working with legal advisers to determine next steps while continuing to comply with all tax and legal obligations.

Its operations in Vietnam are aligned with Coca-Cola’s global business principles, maintaining recognized ethical standards and industry practices, including the appropriate use of legitimate, deductible business expenses, the company stated.

Years of reported losses, transfer pricing concerns

Coca-Cola Vietnam had previously been listed by the Ho Chi Minh City Tax Department as the top enterprise suspected of transfer pricing due to years of significant reported losses.

Before 2013, the company had consistently declared large losses.

It only began reporting profits from 2013 onward, earning VND150 billion ($5.7 million) in 2013 and VND350 billion ($13.3 million) in 2014.

Even then, it was not required to pay corporate income tax because accumulated losses could be carried forward for five years.

The tax agency said the company’s long-running losses were largely tied to the high cost of raw materials, especially flavorings imported from its parent company, often accounting for over 70 percent of the cost of goods sold.

In the 2006-07 period, these costs surged to as much as 85 percent.

By the end of 2012, Coca-Cola Vietnam’s accumulated losses had topped VND3.7 trillion ($143.3 million), exceeding its initial investment of VND2.95 trillion ($112 million).