Italy tax authorities say Fiat underestimated value of Chrysler by US$5.6b

A Fiat Chrysler Automobiles (FCA) sign is seen at the US headquarters in Auburn Hills, Michigan May 25, 2018. — Reuters pic
A Fiat Chrysler Automobiles (FCA) sign is seen at the US headquarters in Auburn Hills, Michigan May 25, 2018. — Reuters pic

MILAN, Dec 5 — Italian tax authorities believe that Fiat Chrysler Automobiles underestimated the value of its US business by €5.1 billion (RM23.6 billion) following Fiat's phased acquisition of Chrysler, according to a company filing and a source close to the matter.

The audit, which concerns transactions dating back to 2014, could result in FCA having to pay back taxes for US$1.5 billion (RM6.26 billion), the source added, confirming a report by Bloomberg.

FCA said in its third-quarter report that the tax authorities had issued to the company a final audit report in October this year “which, if confirmed in the final audit assessment, could result in a material proposed tax adjustment related to the October 12, 2014 merger of Fiat SpA into FCA NV.”

It said the issuance of a final audit report starts a 60-day negotiation period, which ends with the issuance of a final audit assessment expected to be received by the end of December 2019.

“The company believes that its tax position with respect to the merger is fully supported by both the facts and applicable tax law and will vigorously defend its position,” it said in the third-quarter report.

A spokesman for Italy's tax agency declined to comment. “At this time, we cannot predict whether any settlement may be reached or if no settlement is reached, the outcome of any litigation. As such, we are unable to reliably evaluate the likelihood that a loss will be incurred or estimate a range of possible loss,” Fiat said.

News of the tax probe comes at a delicate time for Fiat Chrysler, which is finalising talks with PSA, the maker of Peugeot and Citroen, over a planned US$50 billion merger to create the world's fourth-largest automaker. — Reuters

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