TU-TESL

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According to the Italian tax authorities, Fiat's phased acquisition a few years ago depressed the value of the latter by 5.1 billion euros ($5.6 billion), Bloomberg reported. The move could bring a hefty fine to the carmaker as it prepares to merge with Peugeot Citroen. According to Fiat Chrysler documents and the Italian tax office audit report, the dispute is related to the restructuring in October 2014, when Fiat acquired the last part of Chrysler. The acquisition lasted five years, and Fiat eventually bought Chrysler in full. The restructuring and acquisition created today's FCA group. According to the audit report, the move triggered a so-called "exit tax", a tax imposed by Italy on capital gains realized by companies transferring assets abroad. At that time, the corporate tax rate in Italy was about 27.5%, which meant that Fiat Chrysler faced the risk of having to make up nearly $1.5 billion, but the negotiations could significantly reduce any taxes. Fiat Chrysler declined to comment on the document submitted to regulators on October 31. The company said in the document that it "has the full support of evidence and applicable tax laws, and will actively defend its position". In its third quarter results, Fiat Chrysler said that the Italian tax authorities had issued a final audit report to the company in October of this year, "which, if confirmed, could result in significant tax adjustments related to Fiat's incorporation into the FCA on October 12, 2014. According to people familiar with the matter, the Italian tax authorities valued Chrysler at about 12.5 billion euros, while Fiat, on the advice of its advisers, announced that Chrysler was worth less than 7.5 billion euros. When Fiat Chrysler made its debut on the New York Stock Exchange in mid October 2014, its market value was about 8.3 billion euros. Negotiations with Italian tax authorities will take place within 60 days, according to Fiat Chrysler's third quarter report. The final assessment will take place at the end of the year. If no settlement can be reached, the matter may go to court. "We cannot predict whether a settlement will be reached, or whether a settlement will be reached, and the outcome of any litigation," Fiat Chrysler said on October 31 "We are also unable to reliably assess the probability of a loss or estimate the extent of a possible loss." In January 2014, Fiat agreed to buy the remaining 41.5% of Chrysler for $4.35 billion, which means the overall valuation of Chrysler is about 6.95 billion euros. For Fiat Chrysler, this tax battle is not the right time. At the end of October, FCA and PSA announced a merger plan to better cope with the high cost of new technologies such as electric vehicles and automobiles, as well as the downturn in the global automobile market. The board of directors of both sides has agreed to achieve a comprehensive merger of their businesses by 50:50 share ratio, and the combined company will become the fourth largest auto group in the world with an annual sales volume of 8.7 million units, with an annual operating revenue of about 170 billion euros and a recurring operating profit of over 11 billion euros, generating an annual operating synergy of about 3.7 billion euros. Last month, Fiat Chrysler and Peugeot Citroen said in a letter to their internal staff that they would sign a binding merger agreement in the coming weeks. John Elkann, chairman of Fiat, said their goal was to reach a formal agreement by the end of the year.