PARIS: Italian authorities sent Gucci parent Kering SA a €1.4 billion ($1.58 billion) tax bill, saying the company was paying taxes in Switzerland on profits that were generated in Italy.
According to Italian tax authorities, Kering’s Swiss subsidiary, Luxury Goods International, was conducting business in Italy and should have paid taxes based on that activity, Kering said. Switzerland’s corporate tax rate is substantially lower than Italy’s. The €1.4 billion bill covers unpaid taxes for 2011-17, it said.
“Kering challenges the outcome of the audit report both on the grounds and the amount,” the company said.
Reports of the investigation have shadowed Kering for several years, worrying investors over the company’s potential tax liabilities. Kering said it has “implemented a strict monitoring of its tax risks and has adopted a prudent approach in the appreciation of its tax exposures.”
Kering is the latest fashion company to tangle with Italian tax authorities over allegations of unpaid taxes. Miuccia Prada and Patrizio Bertelli, the husband-and-wife team that controls Prada SpA, were investigated for unpaid taxes, as was Giorgio Armani. The Italian fashion designers Domenico Dolce and Stefano Gabbana were sentenced to 20 months in prison for using a Luxembourg-based holding company to avoid taxes. That sentence was later overturned by Italy’s highest court.
Kering is based in Paris, but its biggest brand is the Italian fashion house Gucci. Sales at Gucci have more than doubled over the past three years, making it one of the top-selling luxury fashion brands. Kering’s other major brands are Saint Laurent, Bottega Veneta and Balenciaga.