Fiat Chrysler Automobiles may face a significant tax bill from half a decade ago, related to moving its official home from Italy to the Netherlands.
As part of the transaction that changed the company's official address, according to the Italian tax authorities, FCA underestimated the value of Chrysler — which it acquired in stages — by about €5 billion ($5.6 billion), people familiar with the matter told Bloomberg and Reuters. That indicates that the company may owe its former home country about $1.5 billion in unpaid capital-gains taxes.
FCA is negotiating to reduce the Italian tax authorities' assessment and said in a filing that any amount due would be "more than offset by tax credits deriving from past losses."
The tax issue, which was noted in the company's third-quarter financial report, adds another layer of complication to FCA's proposed merger with PSA Group. The Italian American automaker was sued last month by General Motors, which alleged that FCA bribed UAW officials to obtain better contracts and to support a hostile takeover of the largest U.S. automaker. FCA also is seeking ratification of a new contract with the union, which has finalized deals with GM and For d Motor Co.
Fiat moved to the Netherlands in 2014 under the direction of the late CEO Sergio Marchionne. The move was enacted through a merger with Fiat Investments NV, a Dutch shell company, to form Fiat Chrysler Automobiles NV. FCA set its fiscal residency in Britain.
Italy valued Chrysler at about $13.8 billion, while Fiat, following advice from its advisers, declared it to be worth less than $8.3 billion, according to sources.
Wire services contributed to this report.