Today, November 27, the Ho Chi Minh City People’s Court rejected Coca-Cola Vietnam’s lawsuit against the Tax Department, upholding the decision to collect over 821 billion VND in back taxes and penalties.

Coca-Cola Vietnam’s lawsuit dismissed

Previously, based on comprehensive audit results spanning from 2019 and cross-referencing Coca-Cola Vietnam’s operational records from 2007-2015, the General Department of Taxation (now the Tax Department) determined that Coca-Cola Vietnam’s previously declared losses needed adjustment – “reducing losses” by over 762 billion VND, while collecting over 471 billion VND in back taxes, plus penalties and late payment fees, totaling over 821.4 billion VND.

The reason Coca-Cola Vietnam failed to declare and fulfill tax obligations in accordance with tax laws and related regulations was due to continuous losses over many years…

After unsuccessful appeals, Coca-Cola Vietnam filed a lawsuit against the Tax Department in court.

The trial of Coca-Cola Vietnam took place on November 6 and continued today, November 27.

During today’s hearing, the trial panel carefully reviewed documents, evidence, audit records, and legal arguments from both sides.

The People’s Procuracy representative affirmed that the tax authority’s decision to collect back taxes and impose penalties was well-founded, recommending the court dismiss Coca-Cola Vietnam’s lawsuit.

As a result, the trial panel rejected Coca-Cola Vietnam’s lawsuit, maintaining the decision to collect back taxes and impose penalties.

This afternoon, Coca-Cola Vietnam responded to the court’s ruling.

Coca-Cola Vietnam stated that it respects the judicial process and the ruling of the Ho Chi Minh City People’s Court in resolving tax-related matters. Coca-Cola Vietnam is collaborating with legal advisors to determine next steps while ensuring full compliance with tax obligations and current laws.

“Our operations in Vietnam align with Coca-Cola’s global business principles, maintaining ethical standards and recognized industry practices, including the proper use of legitimate and deductible business expenses,” Coca-Cola Vietnam affirmed.

Coca-Cola Vietnam reported continuous losses for many years

Previously, Coca-Cola Vietnam was ranked first on the Ho Chi Minh City Tax Department’s list of companies suspected of transfer pricing due to continuous loss declarations over many years. From 2012 backward, the company consistently reported “massive” losses, only beginning to report profits from 2013.

Specifically, in 2013, Coca-Cola Vietnam reported a profit of 150 billion VND and continued with 350 billion VND profit in 2014. However, since companies can carry forward losses for five years, despite profits in these two years, Coca-Cola Vietnam still hadn’t paid corporate income tax at that time.

According to tax authorities, the “secret” enabling this company to continuously report losses lay in raw material costs, primarily flavorings imported directly from the parent company at very high prices.

On average, raw material costs accounted for over 70% of cost of goods sold, particularly reaching 80-85% of cost of goods sold in 2006-2007. By the end of 2012, Coca-Cola’s accumulated losses had reached 3,768 billion VND, exceeding the group’s initial investment of 2,950 billion VND.

The General Department of Taxation has penalized Coca-Cola Vietnam 821 billion VND because the company declared incorrectly, resulting in underpayment of taxes as required by regulations

Ho Chi Minh City People’s Court

The Ho Chi Minh City People’s Court is the primary judicial body for the city, operating under the unified court system of Vietnam. It was established following the reunification of North and South Vietnam in 1975, inheriting the legal framework of the socialist republic. The court handles a wide range of civil, criminal, and administrative cases, upholding the state’s laws and the authority of the people.

Coca-Cola Vietnam

Coca-Cola Vietnam is the local branch of the global beverage company, which first entered the Vietnamese market in 1960 but ceased operations during the war. The brand officially returned in 1994 following the lifting of the US trade embargo and has since become a major player in the country’s beverage industry, establishing local bottling plants and adapting its products to the Vietnamese market.

Tax Department

A tax department is a government agency responsible for collecting taxes and enforcing tax laws. Historically, such departments have evolved from simple revenue collection systems into complex organizations that manage national finances. Their function is crucial for funding public services and infrastructure.

General Department of Taxation

The General Department of Taxation is a government agency responsible for administering and enforcing a country’s tax laws and revenue collection. Its history is tied to the development of the modern state, evolving from simple tribute systems to complex institutions that fund public services. Today, such departments are crucial for national financial stability and implementing fiscal policy.

People’s Procuracy

The People’s Procuracy is a state body in Vietnam responsible for legal prosecution and supervising judicial activities. It was established in North Vietnam in 1960, modeled after the procuracy system of the Soviet Union. Its primary role is to ensure the uniform observance of the law by government agencies and citizens.

Ho Chi Minh City Tax Department

The Ho Chi Minh City Tax Department is the primary government body responsible for tax administration and collection within Vietnam’s largest metropolis. It operates under the national tax system, which has evolved significantly since the country’s economic reforms began in the 1980s. Its main functions include managing tax registration, declarations, and enforcement for businesses and individuals in the city.