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An analysis by Corrs Chambers Westgarth, Taxand Australia
The High Court’s 4–3 decision in Commissioner of Taxation v PepsiCo, Inc [2025] HCA 30 ends one of Australia’s most significant tax disputes, ruling in favour of PepsiCo. The Court confirmed that payments under Schweppes’ bottling agreements were not royalties and thus not subject to royalty withholding tax or diverted profits tax (DPT).
The ruling clarifies contractual interpretation, highlighting the importance of accurately characterising transactions, applying arm’s-length pricing, and maintaining clear documentation. It also provides guidance on embedded royalties, DPT, and key elements of Australia’s general anti-avoidance rules under Part IVA of the ITAA 1936.
Experts from our Australian member firm, Corrs Chambers Westgarth, have published two articles on the ruling, outlining the case and its ongoing implications. They note the decision’s broader relevance for arrangements involving intangibles, such as software and intellectual property. With the ATO expected to issue a Decision Impact Statement, multinationals should anticipate continued scrutiny and ensure robust commercial and economic evidence supports their positions.
You can read the overview of the case here, and its implications here.
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Australia | Case Law | Tax | Tax Disputes | Tax Law | Transfer Pricing | Withholding Tax