Kering, the luxury conglomerate behind renowned brand Gucci, has recently come to a monumental agreement with Italian tax authorities. The settlement, totaling a staggering 1.25 billion euros, aims to bring an end to a prolonged tax dispute. The investigation focused on Kering’s Swiss-based subsidiary, Luxury Goods International (LGI), which was accused of evading taxes on profits generated by Gucci in Italy over a six-year period from 2011 to 2017.
According to a statement released by Kering, the settlement encompasses a payment of 897 million euros for additional taxes, penalties, and interest. This agreement represents the largest settlement ever reached by a company with Italian tax authorities, underscoring the gravity of the situation.
As a consequence of the settlement, Kering anticipates recording a significant tax charge of around 600 million euros in its financial statements for 2019. Initially, the company refuted allegations of tax evasion, but ultimately opted for a settlement to move past the controversy.
Although the settlement is marginally less than the initial projections, ranging from 1.3 billion to 1.4 billion euros, Kering’s tax issues may not be entirely resolved. Swiss authorities have expressed their intention to launch their own investigation into the matter due to the involvement of Switzerland in the suspected irregularities.
Gucci, the iconic fashion house embroiled in the dispute, reported revenues of 8.28 billion euros in 2018. The resolution of this tax case marks a significant milestone in addressing the issue and ensuring compliance with tax laws for Kering, its subsidiaries, and the fashion industry as a whole.
To read more about the tax settlement between Kering and Italian authorities, visit Reuters. For insights into the implications of tax disputes in the luxury sector, check out this article from Vogue Business.
