The Armani Group has been embroiled in a tax audit with the Italian government stemming from the operations of three foreign companies controlled by Armani between the years of 2002-2009. Even though the companies were based in foreign countries, the Italian tax authority claimed that the group should have paid the taxes to Italy. The group has settled this dispute with the authorities and have agreed to pay about $373 million.
Armani is one of many Italian brands that have been targeted for tax audits by Italian authorities, who have begun to crack down on the brands. Bulgari, Prada, Safilo, Marzotto and Luxottica all have settled with the authorities over tax disputes, rather than go to trial.
WWD quotes an Italian legal source as saying, “Twenty years ago, it was extremely common for Italian fashion groups to create subsidiaries abroad for a more favorable tax rate,” and 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. He continued to state that, “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.”