Gucci owner Kering to pay 1.25 billion euros to Italian tax authorities
today May 9, 2019
French luxury goods group Kering said on Thursday it had agreed to a 1.25 billion euro (1.08 billion pounds) settlement to draw a line under a dispute with Italian tax authorities centered on its fashion brand Gucci.
The company's Swiss-based Luxury Goods International (LGI) subsidiary has been under investigation for allegedly avoiding tax on earnings generated by Gucci in Italy from 2011 to 2017.
"The group has concluded today a settlement with the Italian Revenue Agency relating to claims vis-a-vis its Swiss subsidiary," Kering said in a statement. "The settlement will involve the payment of 897 million euros in additional taxes, along with further payment for penalties and interest."
Kering would record a tax charge of around 600 million euros in its 2019 accounts as a result, the company said.
The settlement is the largest ever agreed by a company with the Italian tax authorities.
Last January, the group refuted the accusations of tax evasion and sought to reassure both the markets and investors, stating, "At this stage of the proceedings, Kering does not have the necessary information to record a specific accounting provision based on a reliable estimate of the tax exposure."
Ultimately, the sum of 1.25 billion euros established by the agreement made with Italian tax authorities is a little under the estimates of between 1.3 billion and 1.4 billion euros reported in April.
However, Kering's tax woes aren't quite over yet. As the irregularity being investigated by Italian authorities involves Switzerland, the Swiss Public Prosecutor’s office announced in March that it would also be opening its own investigation.
Gucci, the brand at the center of the case, reported revenues of 8.28 billion euros in 2018.
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