Acquisition of Coke bottling business to attract millions in taxes: taxman

Acquisition of the Coca-Cola bottling operations in Vietnam by Hong Kong-based Swire Pacific could attract millions of dollars in taxes in line with the law, a Vietnamese tax expert says.

Vietnam has full legal rights to collect trillions of Vietnamese dong (VND1 trillion = $42.8 million) in taxes from this merger and acquisition (M&A) deal, Nguyen Van Phung, former director of the General Department of Taxation's tax division for large enterprises under the Ministry of Finance, told The Investor.

“This is a form of direct investment via M&A activities. If the seller does not willingly declare and pay taxes, tax authorities have the right to ask them to report the deal value for tax calculations," he said.

The common corporate income tax in Vietnam is 20%.

Phung stressed that Vietnam’s tax system was “mature” to do this job. He noted that the government had successfully taxed the big M&A deal in 2016 in which Thai retail giant Central Group bought German retail giant Metro AG’s Metro Vietnam chain, despite the latter’s attempts to avoid payment, he recalled.

"If the company wants to operate under the name of a new legal entity (new owner), it needs an amended investment certificate. Only when the company fulfils its tax obligations will the transfer of ownership and remittance of profit be possible," Phung said.

Swire Coca-Cola, a wholly-owned subsidiary of Swire Pacific, announced on July 18 that it had reached a deal to acquire Coca-Cola subsidiaries with bottling businesses in Vietnam and Cambodia.

After closing, Swire Coca-Cola will own and operate Coca-Cola Beverages Vietnam Ltd., which has three bottling facilities in Vietnam (one each in Hanoi, Ho Chi Minh City, and Danang); as well as Cambodia Beverage Company Ltd., which has one bottling facility in Cambodia.

The acquisition’s total value is about $1.02 billion, with regulatory approval expected within six months.

The buyer said the two transactions will be its first investments in Southeast Asia, giving the firm a leading position in one of the world's fastest-growing beverage markets.

"This acquisition marks a major milestone for Swire Coca-Cola, significantly expanding our operating footprint and population served to a new region," Swire Coca-Cola chairman Patrick Healy said.

"We have been investing in building a world-class bottling system over the past 57 years. This expansion of territories is part of a broader strategy to expand the global scale, volume and revenues of our bottling business,” he stated from Hong Kong.

The company said in a release on July 18: “With young demographics, robust urbanization trends, and pre-pandemic GDP growth of over 7% per year, Vietnam and Cambodia open up significant opportunities for Swire Coca-Cola.”

“The non-alcoholic beverage markets in Vietnam and Cambodia are valued at over $6 billion and forecast to grow at over 6% in compound annual growth rate, or CAGR, until 2036," Swire Coca-Cola managing director Karen So said. “We look forward to the next exciting chapter in our history as we make our first foray into South East Asia."