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Kering: Italy tax settlement is closed

May 10, 2019 Italy
Kering: Italy tax settlement is closed
The French-based luxury group announced that it has concluded a settlement with the Italian Revenue Agency relating to claims vis-a-vis its Swiss subsidiary Luxury Goods International S.A. (LGI)
The settlement, concluded after in-depth analysis and with a collaborative spirit, acknowledged that the claims raised during the tax audit regard both the existence of a permanent establishment in Italy in the period 2011-2017 with the associated profits, and the transfer prices applied by LGI in the same period with its related party Guccio Gucci S.p.A..

The settlement will involve the payment of 897 million euros in additional taxes, along with further payment for penalties and interest. The total required payment amounts to 1.25 billion euros.

Based on an initial estimate, this agreement should impact Kering’s consolidated financial statements in 2019 with an additional tax charge of around 600 million euros in the income statement and an outflow of 1 250 million euros in the cash flow statement.

The litigation between Italian Revenue and the French giant started when the Italian Finance Police charged the French group with an alleged tax fraud: roughly 1.4 billion euros, coming from eluded revenues, 14.5 billion euros, from 2011 till 2017. At that time, Luxury Goods International (LGI), a Swiss subsidiary, was in charge of Gucci products marketing and sale and the charge was based on the fact that lower taxes were paid in Switzerland for commercial and business activities actually carried out in Italy.

Photo by Álvaro Serrano on Unsplash

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