Bloomberg reported Thursday that
Italian tax authorities have claimed Fiat Chrysler Automobiles
underestimated the value of its American business by 5.1 billion
euros ($5.6 billion) following its phased acquisition of
Chrysler several years ago, presenting the carmaker with a
potentially hefty bill as it prepares to merge with French rival
PSA Group.
Bloomberg said the dispute relates to the company structure
created in October 2014 following Fiat SpA's purchase of the
remainder of its Chrysler unit, according to company filings and
an October 22 audit report seen by Bloomberg.
The purchases stretched over five years and culminated in the
full takeover of the once-bankrupt owner of brands such as
Dodge, Ram and Jeep, Bloomberg said.
Fiat Chrysler is now registered in the Netherlands with a tax
residence in the U.K. - not Turin, Fiat's home for more than a
century.
The move triggered the so-called exit tax that Italy collects
on capital gains realized when companies move assets outside the
country, according to the audit report.
Italy had a corporate tax rate of about 27.5% at the time,
suggesting the amount at risk for Fiat Chrysler could approach
$1.5 billion, though negotiations could significantly reduce any
levy.
"We strongly disagree with this preliminary report, and we
are confident we will successfully make the case for a material
reduction in the assessment," a Fiat Chrysler spokesman said in
an email to Bloomberg.
"It's also important to note that any remaining taxable gain
assessed would be offset by carry forward tax losses with no
material cash outflow or impact on earnings."
Premier Giuseppe Conte said recently that Fiat Chrysler's
plan to merge with PSA Peugeot to create the world's
fourth-biggest carmaking group must not have a negative impact
in terms of jobs in Italy.
"The government cannot remain indifferent to such an
important industrial project," Conte said during a visit to
FCA's plant in Melfi.
"This project must not compromise plants and employment in
Italy in any way, including for suppliers".
Conte said the Melfi plant was "an example of a country that
overcomes complex phases".
He reiterated that the government would show "the utmost
commitment to saving jobs".
The 2020 budget would contain "concrete measures to relaunch
the automotive sector" in Italy, the premier said.
He also said the government was working on rejigging a
measure on the fringe benefits attached to company cars.
The budget would also include a 10% 'green' tax break for
production to be converted along ecological lines, Conte said.
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