- Don-Alvin Adegeest |
Kering announced on Thursday that it concluded a settlement with the Italian Revenue Agency relating to claims it had evaded paying taxes for Gucci between 2011 and 2017, vis-a-vis its Swiss subsidiary Luxury Goods International S.A. (LGI).
The French luxury group, which manages fashion houses including Gucci, Saint Laurent, Bottega Veneta and Balenciaga, said in a statement the settlement was concluded after in-depth analysis and "with a collaborative spirit."
The company 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..
Kering required to pay 1.25bn euros in taxes and penalties
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 600m euro in the income statement and an outflow of 1,250m euro in its cash flow statement.
Gucci Chief Executive Marco Bizzarri and former CEO Patrizio Di Marco are both under investigation concerning the case, due to "their capacity as legal representatives of the company”, Kering confirmed on Thursday.
Kering added that it was “confident that the situation regarding the criminal investigation will be clarified.”
According to Reuters, Kering’s deal follows a series of swoops on Italy’s fashion industry in recent years, including on Armani and jeweler Bulgari, after a prolonged recession where some of the country’s more prosperous sectors came under scrutiny from the taxman.
In 2014 Dolce & Gabbana were found guilty for evading taxes totalling 200m euros, and could have faced a prison term of 18 months. The ruling was later overturned by the Italian supreme court.
Photo credit: Gucci, Facebook