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Armani Group Settles With Italian Tax Authority

The case concerns three foreign subsidiaries in the 2002-2009 period.

MILAN — The Giorgio Armani Group has agreed to pay a total of 270 million euros, or $373 million at current exchange, to Italy’s internal revenue service, the Agenzia delle Entrate, a company spokesman confirmed.

News of the settlement was first reported in Italian newspaper Il Sole 24 Ore. It said the agency’s audit concerned the operations of three foreign companies directly controlled by Giorgio Armani in the 2002 to 2009 period. Although the Giorgio Armani Group brought back the tax residency of the aforementioned companies in Italy in 2009, the revenue office claimed that the group should have paid the income taxes in Italy.

Among the companies investigated was GA Modefine SA, a subsidiary located in Switzerland, which was handling the international distribution of the group’s products. In keeping with the group’s restructuring plan, aimed at concentrating strategic activities in Italy, in 2009 Giorgio Armani officially closed GA Modefine and moved its functions to the group’s Italian headquarters.

Giorgio Armani is the latest Italian fashion company to settle with the Italian Revenue Agency. Recently, Bulgari, Prada, Safilo, Marzotto and Luxottica all opted for a settlement to avoid going to trial.

“Twenty years ago, it was extremely common for Italian fashion groups to create subsidiaries abroad for a more favorable tax rate,” said a legal source, who pointed out that the Italian law allows these practices only if the companies can demonstrate that the subsidiaries are not only operative, but also feature an autonomous strategic management and an effective board of directors. “In the last five years, the tax agency has tightened the belt, and fashion companies are reorganizing to avoid any agency’s audit, which can seriously damage their image,” he added, referring to the numerous settlements made by Italian fashion firms.

Armani has settled tax disputes with the Italian authorities in the past. The designer made two settlements in 1996 because he admitted to having paid bribes to Italian tax police. This resulted from a major probe into the Guardia di Finanza, Italy’s fiscal police, part of the Clean Hands action.