Coca-Cola Beverages Vietnam loses lawsuit against local tax authority

The Ho Chi Minh City People's Court on Thursday dismissed a lawsuit filed by Coca-Cola Beverages Vietnam against the Ministry of Finance's Department of Taxation, thereby upholding the department's decision to collect back taxes and impose a fine of over VND821 billion ($31.14 million) in total.

On December 25, 2019, the chief of the General Department of Taxation (now renamed as the Department of Taxation) issued a decision to impose administrative penalties on Coca-Cola Beverages Vietnam for the company's false declaration which had led to its tax underpayment.

Remedial measures include collecting VND471 billion ($17.86 million) in back taxes, including more than VND60 billion in VAT, over VND359 billion in corporate income tax (CIT), VND51 billion in tax paid on behalf of foreign contractors; and VND288 billion ($10.92 million) in late payment fees as of December 16, 2017.

The total amount of back taxes, late payment fees, and fine is VND821 billion ($31.14 million).

On January 9, 2020, Coca-Cola Beverages Vietnam filed a complaint to the department against part of the above decision, related to the collection of CIT and VAT on products and promotional items; refrigerators provided for use by organizations and individuals; fixed assets such as bottles, plastic safes; and some machinery warranty costs... for which the enterprise has not provided documents and invoices.

After that, the General Department of Taxation issued a decision to resolve the complaint for the first time, not accepting the complaint of Coca-Cola Beverages Vietnam and maintaining the previously issued decision to collect VND821 billion.

On May 26, 2022, the firm filed a lawsuit, asking the Ho Chi Minh City People's Court to cancel the department's decision to impose administrative penalties and partially cancel the department's decision to resolve the first complaint against this company.

In documents submitted to the court, the General Department of Taxation stated that the financial statements of Coca-Cola Beverages Vietnam showed that in its 22 years of operation (from 1994 to 2015), the company continuously operated inefficiently.

However, the company's production and business activities and revenue grew relatively steadily. Net revenue in 2001 reached VND197 billion ($7.47 million), it was VND592 billion in 2004, VND1,132 billion in 2008, VND3,412 billion in 2012, and the figure increased to VND6,824 billion ($258.83 million) in 2015, the department noted.

Despite the steady revenue growth, Coca-Cola Beverages Vietnam has reported losses for many consecutive years, has not incurred CIT to the state budget for 21 years, and only paid CIT of VND115 billion ($4.36 million) in 2015, it added.

Based on the above signs, in 2016 and 2017, the chief of the General Department of Taxation issued a decision on tax inspection at this company in the period 2007-2015.

Although the tax authority agreed to extend the time for explanation at the request of the enterprise, Coca-Cola Beverages Vietnam extended the time to provide records and documents to the inspection team to serve the preparation of administrative violation records and issuance of penalty decisions.

The department's inspection team prepared a tax inspection record at the company on December 17, 2019. After reaching a conclusion, the chief of the department issued a penalty decision and a decision to resolve the first complaint against Coca-Cola Beverages Vietnam.

The department affirmed that the inspection process and the issuance of decisions were carried out in accordance with the order, procedures, and legal regulations. This agency requested the panel of judges to reject all lawsuit requests of Coca-Cola Beverages Vietnam.

According to the panel of judges, the decisions of the tax authority were issued in accordance with the provisions of law. During the trial, Coca-Cola Beverages Vietnam said that the decisions of the tax authority had some inappropriate contents, but could not provide evidence to prove it.

After the trial, Coca-Cola Beverages Vietnam was quoted by local media as saying that it respects the trial process and the verdict of the Ho Chi Minh City People's Court regarding the tax case, and the company is considering the next steps in the lawsuit.

Coca-Cola entered Vietnam in 1994 and was one of the first American companies to invest in Vietnam after the two countries normalized diplomatic relations in July 12, 1995.

Coca-Cola Beverages Vietnam on July 11 inaugurated a $136 million factory in Tay Ninh province, the largest-scale among its four facilities in Vietnam.

The 19-hectare factory, located in Phu An Thanh Industrial Park, Ben Luc district, is the first food and beverage factory in Vietnam to achieve LEED Gold certification.

The facility is equipped with five advanced bottling lines, with a total capacity of up to 1 billion liters of beverages per year.

Coca-Cola Beverages Vietnam is a member company of Swire Coca-Cola Limited, a subsidiary of Swire Pacific Ltd. It currently has four factories located in Ho Chi Minh City, Tay Ninh, Da Nang, and Hanoi.

The company has created jobs for about 4,000 direct employees. It has reached 800,000 retail points nationwide with an ecosystem of 11 products.

Long An and Tay Ninh were recently merged to form new Tay Ninh province which borders Dong Nai, Dong Thap, Ho Chi Minh City, and Cambodia.