The Kering case: Gucci, LGI and the Italian tax authorities

The structure under review

The structure that the Italian authorities examined can be reconstructed from the public reports of the investigation and from Kering's own statements. Guccio Gucci S.p.A. in Florence designed the collections and organized production through a network of Italian manufacturers. Luxury Goods International SA in Cadempino bought the finished goods, held them in its warehouses in Ticino and sold them to the group's distribution companies and to wholesale customers around the world. LGI therefore booked the margin between the purchase price paid to the Italian side and the resale price obtained from the distributors. Kering presented the arrangement as a matter of transfer pricing, that is, of the price at which LGI bought from the Italian company. The prosecutors in Milan presented it as a stabile organizzazione occulta (hidden permanent establishment), meaning that the business attributed to LGI was in substance conducted in Italy and should have been taxed there.¹

The difference between the two characterizations is decisive for the amounts at stake. If the dispute concerns only the transfer price, the Italian authorities can at most increase the price paid by LGI to Guccio Gucci S.p.A. to an arm's length level and tax the difference in Italy. If LGI had a permanent establishment in Italy, the profit attributable to that establishment is taxable in Italy in full. If the dispute is framed in criminal terms, the failure to file an Italian tax return for the permanent establishment can constitute the offence of omessa dichiarazione (failure to file a tax return). Article 5 of Legislative Decree no. 74 of 10 March 2000 punishes it by imprisonment where the evaded tax exceeds EUR 50,000 a year.² The criminal characterization also explains why the public prosecutor's office conducted the investigation alongside the tax administration, and why the Guardia di Finanza searched Gucci's offices in December 2017.³

The investigation, 2017–2019

The investigation by the Milan public prosecutor's office was led by the prosecutor Stefano Civardi and concerned the tax years 2010 to 2016. According to the reports published when the investigation was closed in November 2018, the prosecution alleged that about EUR 1.3 billion of tax had been evaded. It named the chief executive of Gucci, Marco Bizzarri, and his predecessor, Patrizio Di Marco, as suspects in their capacity as legal representatives of the company.⁴ Press reports attributed to the Guardia di Finanza an estimate of about EUR 14.5 billion of revenues that should have been declared in Italy, with a tax claim against the Swiss company of about EUR 1.4 billion.⁵ Kering stated throughout that it was confident that the matter would be clarified and continued to describe the dispute as a question of transfer pricing.

The closure of the investigation in November 2018 opened two paths. The prosecution could request a trial, or the parties could settle the tax dispute with the Agenzia delle Entrate (Italian Revenue Agency) and thereby reduce the criminal exposure of the individuals concerned. Kering chose the second path. On 9 May 2019 the group announced an agreement with the Agenzia delle Entrate through the procedure of accertamento con adesione (assessment by agreement). It covered the years 2011 to 2017 and both the permanent establishment and the transfer pricing questions. The settlement amounted to EUR 1.25 billion in total, of which EUR 897 million was additional tax and the remainder penalties and interest. Kering recorded a charge of about EUR 600 million in its 2019 income statement, the rest having been provided for, against a cash outflow of EUR 1.25 billion.⁶ The Italian press described it as the largest settlement ever reached between the Italian tax administration and a private company.⁷

Notes

1. Money.it (28 November 2018, above); FashionUnited, "Kering settles Italian tax probe, owes 1.25 billion euros" (10 May 2019), https://fashionunited.com/news/business/kering-settles-italian-tax-probe-owes-1-25bn-euros/2019051027720. ↩
2. Legislative Decree no. 74 of 10 March 2000, Nuova disciplina dei reati in materia di imposte sui redditi e sul valore aggiunto, Art. 5(1) (imprisonment from two to five years where the evaded tax exceeds EUR 50,000 for any single tax; penalty as amended by Art. 39(1)(h) of Decree-Law no. 124 of 26 October 2019), Brocardi.it, https://www.brocardi.it/legge-sui-reati-tributari/titolo-ii/capo-i/art5.html. See Chapter G.IV. ↩
3. Money.it (28 November 2018, above). ↩
4. Money.it (28 November 2018, above). The period 2010–2016 is that of the criminal investigation; the tax settlement covered 2011–2017. ↩
5. Il Fatto Quotidiano (9 May 2019, above). ↩
6. FashionUnited (10 May 2019, above); Il Fatto Quotidiano (9 May 2019, above). ↩
7. Il Fatto Quotidiano (9 May 2019, above) ("la più alta conciliazione fiscale"). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.