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Italy Says Fiat Undervalued Chrysler in Takeover

After Fiat Group acquired Chrysler Group in 2014, it undervalued the American company by €5.1 billion ($5.6 billion), according to Italy’s tax bureau.
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After Fiat Group acquired Chrysler Group in 2014, it undervalued the American company by €5.1 billion ($5.6 billion), according to Italy’s tax bureau.

Now authorities claim that Fiat Chrysler Automobiles NV owes roughly €1.4 billion ($1.5 billion) in back taxes, Bloomberg News reports. The news service says FCA acknowledged the issue in an October audit report but insists it is fully compliant with Italian tax law.

The dispute adds another complication to FCA’s intended merger with France’s PSA Group. But sources tell Bloomberg that PSA doesn’t expect the audit to disrupt or harm the deal.

At issue is what happened when Fiat completed its stepped, five-year purchase of Chrysler and merged the two companies. The newly created FCA moved its global headquarters from Fiat’s home in Turin to London, making the U.K. its tax domicile.

The relocation triggered an Italian exit tax, which is levied on capital gains when companies move assets out of the country.

At the time, Fiat valued Chrysler at €7.5 billion ($8.3 billion), sources tell Bloomberg. But Italy’s tax office claims Chrysler’s actual value at the time was €12.5 billion ($13.8 billion). The news service notes that FCA debuted on the New York Stock Exchange in 2014 with a market value of about €8.3 billion ($9.2 billion).

If negotiators don’t agree on a settlement by the end of this month, the matter could go to court.

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