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Luxottica Facing Tax Audit

The Italian eyewear giant confirmed a tax audit over some of its accounting practices, but insisted it follows universally accepted practices.

MILAN — Italian eyewear giant Luxottica on Thursday confirmed a tax audit over some of its accounting practices, but insisted it follows universally accepted practices.

This story first appeared in the January 25, 2013 issue of WWD.  Subscribe Today.

The audit concerns alleged irregularities in the use of a practice called transfer pricing, which is understood to be the price at which divisions of a company transact with each other. Transactions may include the trade of supplies or labor between departments.

Luxottica said it “has been consistently adopting and applying a fair and correct transfer pricing policy, totally compliant with the law and the most updated guidelines issued by the OECD [the Organization for Economic Co-operation and Development],” which the company described as “the undisputed leading authority for transfer pricing.”

Luxottica, which in addition to house brands such as Ray-Ban and Oakley, produces eyewear collections for brands including Burberry, Chanel, Ralph Lauren and Versace, said “the challenge by the Italian Revenue Service specifically concern[s] the ordinary export of products by the Italian manufacturing company Luxottica Srl to its trading affiliates located in all the main markets.”

The company underscored that these “are routine commercial transactions, i.e. the sales of products within the corporate group of Luxottica. These are not extraordinary transactions, nor transactions involving low-tax jurisdictions or otherwise aimed at shifting income abroad.”

It is understood that the Guardia di Finanza, an Italian police force under the authority of the national minister of economy and finance, and the Italian Revenue Service have been looking at Luxottica’s accounts to determine whether the company has evaded declaring income in Italy. A source said the evasion would revolve around an unfaithful tax declaration of more than 2 million euros, or $2.6 million at current exchange.

Following a request from prosecutors, the police have been visiting Luxottica’s headquarters and offices in the Italian town of Agordo, near Belluno.

“The Italian company Luxottica Srl sells its products to affiliates generally resident in OECD member countries and in any case in high-tax jurisdictions, so no tax benefit was sought in these transactions: It is not even conceivable to argue the existence of a transfer pricing practice aimed at an abusive intent and subject to sanctions,” contended the company.