Luxury fashion giant Kerring has agreed to pay a total of €1.25bn (£1.07bn) to the Italian Revenue Agency relating to claims over alleged tax evasion, in relation to its Swiss subsidiary Luxury Goods International (LGI).
It comes after Swiss prosecutors opened an investigation into luxury fashion group in March last year, following a request for assistance from Italian authorities.
According to reports, an Italian inquiry which began in November 2017 looked into whether profits Kerring made on Gucci sales in Italy had actually been declared in Switzerland, where tax laws are more favourable.
However, in a statement to Reuters on 16 March 2018, Kerring said it had complied with Swiss tax laws and that its distribution center in Switzerland exercised “tangible business activities”.
The settlement, which it said 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.
Based on an initial estimate, the retailer said the agreement should impact Kering’s consolidated financial statements in 2019 with an additional tax charge of around €600m (£518m) in the income statement, and an outflow of €1.25bn (£1.07bn) in the cash flow statement.
