High Court Sides with PepsiCo in Landmark Tax Battle Against ATO

In a major legal defeat for the Australian Tax Office, the High Court has dismissed its case against global beverage giant PepsiCo, ruling the company is not liable for Australian taxes under its bottling arrangement.

The ATO had argued that PepsiCo should pay tax on payments made through an exclusive bottling deal with Schweppes Australia, which manufactures drinks like Pepsi, Mountain Dew, and Gatorade using concentrate sourced from a Singapore-based PepsiCo entity.

Central to the case was whether Schweppes’ use of trademarks and intellectual property amounted to a royalty something that would trigger tax obligations. However, the court rejected both key arguments presented by the ATO, effectively shutting down the claim.

The arrangement saw Schweppes Australia pay for concentrate from PepsiCo Beverage Singapore, with over 99% of those funds then transferred to another Singaporean company within the PepsiCo group.

Despite the ATO’s assertion that the deal granted Schweppes access to valuable branding and IP, the High Court found no grounds for taxation under current laws, marking a comprehensive win for the soft drink titan.