Marlboro case could be stubbed out

Vinataba-Philip Morris has been in a dispute with director of Can Tho Department of CustomsPhoto: Le Toan

Late last month, Vinataba-Philip Morris Limited (VPM), a joint venture between Vietnam’s state-owned National Tobacco Corporation and PT Hanjaya Mandala Sampoerna Tbk, a PM Global Brands Inc. affiliate, sued director of Can Tho Department of Customs Nguyen Huu Co in a case lodged with Can Tho People’s Court and petitioned for the tax assessment to be re-examined.

Its claim related to a dispute over a copyright license fee which has lasted for more than a year following the local customs department presenting a claim for duties to the company in March 2012.

The department claimed that the company had paid a copyright license fee for Marlboro products for the entirety of 2011 to its partner PM Global Brands Inc. (PMGB), but the payment  had not been calculated in the taxable value.

Specifically, according to the contract between Vinataba-Philip Morris and PMGB, in order to use PMGB’s commercial brand-name, Vinataba-Philip Morris must use imported materials as specified by PMGB and that Vinataba-Philip Morris were obliged to pay 12 per cent of its sales from the products to PMGB each quarter.

The total amount paid to PMGB reached $2.95 million for the entirety of 2011.

Can Tho customs authorities claimed that the licensing rights that Vinataba-Philip Morris paid to PMGB would have taxable value.

Can Tho Department of Customs then issued Decision 219/QD-HQCT demanding outstanding tax payments of VND4.95 billion ($235,714) with an additional fine of 10 per cent on the tax duty.

However, Vinataba-Philip Morris claimed the contract just regulated trading of materials between two parties and did not mention any licensing rights. Therefore, the licensing rights were not related to imported materials.

After receiving the customs department decision, the company paid duties as previously required and lodged two unsuccessful bids for the decision to be over-turned.

Can Tho Department of Customs director Nguyen Huu Co refused to comment when  contacted by VIR last week. The General Department of Customs in a document in reply to Vinataba-Philip Morris in late 2012 agreed with Can Tho Department of Customs that its decision was completely justified under current regulations on defining the taxable value of a licensed copyright.