Long-running PepsiCo tax dispute set to fizzle out

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The company has continually sent proposals to the prime minister and Can Tho municipal authorities, seeking to have investment incentives realised for its second production plant.

The project received an investment certificate in 2008 from Can Tho Export Processing and Industrial Zone Authority (CEPIZA), which specified the investment incentives applicable to the new plant.

Accordingly, the company was allowed to enjoy a preferential corporate income tax (CIT) rate of 15 per cent for 12 years, a three-year tax exemption, and a 50 per cent reduction over the next seven years, as is applicable to new investment projects.

However, in 2012, the General Department of Taxation’s (GDT) inspection team ruled that Suntory PepsiCo was not entitled to such incentives. The GDT argued that the Can Tho-based production plant was just an investment expansion project, since it had followed the same branch model as its initial plant in Ho Chi Minh City.

At that time, differences existed in terms of investment incentives between new projects and expansion projects. Expansion projects were only entitled to a three-year tax exemption, and a 50 per cent reduction in the five (not seven) following years. Meanwhile, new investment projects could enjoy incentives as stated in the investment certificates.

Also during that period, there was a stark difference between the investment law and the CIT law. The investment law encouraged investment in new projects, whereas the CIT law offered fewer incentives for the expansion of existing projects.

Complicating an already confused situation, the investment incentives applicable to expansion projects were also changed significantly during 2009-2013.

Prior to 2009, expansion projects enjoyed the same investment incentives that applied to new investment projects, but during the 2009-2013 period, such expansion projects were not entitled to tax incentives, as a result of a new CIT Law.

On the back of widespread complaint from the business community, the CIT Law was revised again in 2013, and at present, investment incentives apply equally to both new and expansion projects.

In this case, Suntory PepsiCo Vietnam is confident that its Can Tho-based plant should enjoy the maximum incentives.