Kering is to pay €1.25 billion to the Italian authorities, including €897 million in additional taxes, along with further payment for penalties and interest. The agreement is expected to impact Kering’s consolidated financial statements in 2019, with an additional tax charge of around €600 million in the income statement and an outflow of €1,250 million in the cash flow statement. 

“The settlement, 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”, said Kering in a statement.

Earlier this year, the Italian authorities had claimed €1.4 billion in unpaid taxes to Kering. LGI conducted business activities in Italy which should have resulted in payment of Italian corporation taxes.