Farfetch Faces Tax Scrutiny in Italy

Luxury e-commerce and streetwear giant Farfetch is facing a “review” by Italian tax authorities at one of its subsidiaries in the country, the company disclosed in its annual report Friday.

Farfetch’s Italian subsidiaries include New Guards Group, the luxury streetwear outfit that operates Off-White and Ambush, as well as Farfetch’s Italia division and Palm Angels, the label in which it acquired a controlling stake last November.

”Italian authorities are currently reviewing the activities of one of our subsidiaries for the years 2015 through 2020, including whether that subsidiary had a permanent establishment in Italy and our transfer pricing policies,” Farfetch said in the report.

Both New Guards Group and Palm Angels were founded in 2015. Farfetch declined to comment on which unit or units were concerned by the inquiry.

Italian authorities have cracked down in recent years on fashion companies who allegedly reduced their taxes and social charges by paying salaries and funnelling revenues through lower-tax jurisdictions.

In 2019, Kering paid $1.5 billion in a settlement over its alleged use of a logistics centre in Ticino, Switzerland, to reduce the taxes of its flagship brand Gucci. Dolce & Gabbana faced a drawn-out court battle over payments to a Luxembourg subsidiary, while Bulgari faced an inquiry over its use of an Irish subsidiary in the years leading up to its sale to LVMH.

Kering and Tom Ford are among the brands to have ceased operations in the low-tax Swiss canton of Ticino, long dubbed “Fashion Valley.”

European governments have recently made a priority of pushing tech giants to pay more taxes locally as well.