PepsiCo, Inc v Commissioner of Taxation [2023] FCA 1490

FEDERAL COURT OF AUSTRALIA

PepsiCo, Inc v Commissioner of Taxation [2023] FCA 1490 File numbers: VID 53 of 2022 VID 55 of 2022 VID 56 of 2022 VID 57 of 2022 VID 74 of 2022 VID 82 of 2022

Judgment of: MOSHINSKY J

Date of judgment: 30 November 2023

Catchwords: TAXATION – royalty withholding tax – where the taxpayers were United States companies – where the taxpayers entered into exclusive bottling agreements (EBAs) with an Australian company under which the Australian company would manufacture, bottle, sell and distribute finished beverages in Australia in the taxpayers' branded packaging – where the EBAs contained a licence of the taxpayers' trademarks and other intellectual property to the Australian company – where the EBAs provided for the sale of concentrate by the taxpayers or a nominated seller to the Australian company – where the EBAs provided for the Australian company to pay for the concentrate but did not expressly provide for a royalty to be paid for the licence of the intellectual property – whether the taxpayers were liable to pay royalty withholding tax on a portion of the payments made by the Australian company under the EBAs – held: a portion of the payments was subject to royalty withholding tax TAXATION – diverted profits tax – where the taxpayers were United States companies – where the taxpayers entered into exclusive bottling agreements (EBAs) with an Australian company under which the Australian company would manufacture, bottle, sell and distribute finished beverages in Australia in the taxpayers' branded packaging – whether, on the assumption that the payments made by the Australian company under the EBAs were not subject to royalty withholding tax, the taxpayers were liable to pay diverted profits tax – whether the taxpayers obtained a "tax benefit" in connection with a scheme – whether it would be concluded that the person or one of the persons who entered into or carried out the scheme did so for a principal purpose of enabling the relevant taxpayer to obtain a tax benefit or both obtain a tax benefit and reduce foreign tax liabilities