French luxury group Kering is close to agreeing to pay between 1.3 billion (£1.1 billion) and 1.4 billion euros to settle a dispute with Italian authorities over unpaid taxes by its fashion brand Gucci, three sources told Reuters on Thursday.

An agreement between the group and the Italian tax authority is expected to be signed in the first few days of May, said one of the sources, who all have direct knowledge of the matter.

This would be the biggest tax settlement ever agreed by a company with the Italian tax authorities.

Kering said in an emailed statement it had held regular discussions with the Italian tax service, adding the meetings took place in “an open and collaborative climate”.

“At this stage, no agreement has been reached yet on any specific figure,” it added.

The tax authority could not immediately be reached for comment.

Earlier this year, Kering said it faced a claim for 1.4 billion euros in unpaid Italian taxes, adding it contested the preliminary findings.

The group has consistently denied avoiding tax, saying its activities were fully compliant with all tax obligations.

The company’s Swiss-based Luxury Goods International (LGI) subsidiary has been under investigation for allegedly avoiding tax on earnings generated elsewhere.

Most of the allegations centre on Gucci, whose offices in Milan and Florence were raided by Italian police in late 2017.

In November, Milan prosecutors wrapped up their probe into alleged tax evasion of more than 1 billion euros by Gucci for revenues booked in the years between 2010 and 2016.

The prosecutors say that revenues booked through LGI should be taxed in Italy and not in Switzerland.
By agreeing to a settlement, Kering would be spared from having to pay interest and sanctions for late tax payments, which one source said would have added around 500 million euros to the final bill.

Gucci’s Chief Executive Marco Bizzarri and former CEO Patrizio Di Marco are under investigation in the case.

That investigation is expected to conclude with a separate settlement once the agreement on the tax dispute has been signed, one of the sources added. Lawyers for Bizzarri and Di Marco could not immediately be reached for comment.