Despite its efforts to dispute a tax claim, Coca-Cola Vietnam has been ordered to pay VND821 billion ($31.1 million) in back taxes and penalties after losing a lawsuit. The lawsuit was dismissed by the HCMC People’s Court last Thursday. This judgment upholds the decision made by the General Department of Taxation on December 25, 2019.
The tax authorities began to question Coca-Cola Vietnam’s tax filings for the business period from 2007 to 2015. Subsequent investigations revealed that the company had made errors in its filings, leading to an order for it to pay VND471 billion in back taxes and VND288 billion as a penalty for late payment.
In court documents, the tax department revealed that Coca-Cola Vietnam had consistently reported losses from 1994 to 2015, resulting in no payment of business income taxes for those years, excluding 2015 when it paid VND115 billion. However, a contrary trend was noticeable in its net revenues, which consistently rose during this period. The company’s net revenues had reached VND197 billion in 2001, VND1.13 trillion in 2008, and VND6.82 trillion in 2015.
An audit of Coca-Cola Vietnam’s tax filings for the years 2016-2017 was conducted by the tax authorities. The audit, which concluded in December 2019, found incorrect filings, leading to the company’s underpayment of taxes. Coca-Cola Vietnam lodged a complaint in 2020, requesting the removal of part of the order, but this was dismissed by the tax department. Consequently, the company initiated a lawsuit in 2022.
During the lawsuit, Coca-Cola Vietnam acknowledged disagreements with some of the tax authorities’ conclusions but was unable to provide sufficient evidence to support its case. The tax department maintained that its audit and decisions were in accordance with the law, a position which the court validated.
Despite the dismissal of its appeal, Coca-Cola Vietnam stated that it respects the court’s procedures and judgement, reiterating its commitment to full compliance with tax regulations. The company is currently contemplating its subsequent moves.
Coca-Cola made its entry into the Vietnam market in 1994, becoming one of the first U.S. companies to invest in the country after diplomatic relations were normalized. In more recent years, the company invested $136 million to establish a new factory in the southeastern province of Tay Ninh, indicating its continued intent to contribute to Vietnam’s development.
What was the outcome of Coca-Cola Vietnam’s lawsuit?
The company’s lawsuit was dismissed, and it was ordered to pay VND821 billion ($31.1 million) in back taxes and penalties.
What accounting discrepancies were found by the tax authorities?
The tax authorities found that Coca-Cola Vietnam had been reporting losses consistently from 1994 to 2015, resulting in no payment of business income taxes for those years, except for 2015. However, the company’s net revenues had been steadily rising during this same period.
How has Coca-Cola reacted to the court’s decision?
Coca-Cola Vietnam has expressed respect for the court’s procedures and judgement. The company maintains that it has always fully complied with tax regulations and is considering its next course of action.
