Luxottica reached an agreement with Italian tax authorities on the treatment of transfer pricing, the method used to determine the pricing of intra-group transactions. It is going to result in extra charges of €33 million following a tax audit that concerned transactions related to the export of finished products from Italy to the group's foreign subsidiaries in 2007.

The tax authorities claimed that the group had sold the goods to its foreign subsidiaries below market prices to lower its tax bill. Luxottica denied any wrongdoing, pointing out that the subsidiaries are located in countries that do not benefit from “privileged tax regimes.”

It added that the agreed tax adjustment concerned income that was regularly taxed at the level of its foreign units. The group will evaluate ways in which it can recover the sums paid to tax authorities abroad.

As part of the audit, Luxottica's offices in Agordo, Italy, were searched by the tax police last Jan. 14 in an investigation into alleged tax avoidance led by a public prosecutor, Antonio Bianco. The company stated that it has always acted in accordance with the law and without any intent to avoid paying taxes. It noted that the transfer pricing method adopted in 2007 is the same that it had used in previous years and that no allegations of irregularities had been made in the course of prior audits.

Luxottica said that it was convinced it had acted appropriately. It added that the matter of the dispute is largely subjective and can only be resolved in litigation through costly and lengthy judicial proceedings with, inevitably, an uncertain outcome.