By Gilles Castonguay
MILAN--Fiat Industrial SpA (FI.MI) Wednesday denied news reports
that its plans to seek fiscal residency in the U.K. were aimed at
reducing in a significant way the amount of taxes it pays in Italy,
the industrial group's home country, whose taxes are among the
highest in Europe.
The reports, based on a prospectus filed to U.S. regulators,
alarmed politicians in Rome, where the government's searching for
ways to raise money without hurting taxpayers more than it already
has with a series of austerity measures implemented last year.
Although the maker of tractors and trucks confirmed its
intention to apply for U.K residency--which would entail setting up
headquarters in that country--it said the transfer wouldn't have a
"material impact" on the amount of taxes paid in Italy.
"Any assertions to that effect are absolutely without
foundation," it said in a statement. "Group companies maintain a
legal presence in the various countries where they operate and will
continue to pay taxes in those jurisdictions as before."
Fiat Industrial said the motive behind the application was to
make itself more attractive to investors.
"The Group believes that establishing its tax domicile in the
United Kingdom would put (the company's) shareholders on the same
level ground as those of its principal competitors," it added.
Fiat Industrial didn't elaborate, but a corporate tax expert
said in an interview on Tuesday that U.K residency would enable it
to avoid paying a withholding tax on the dividends it receives from
its foreign operations and distributes to shareholders.
The biggest beneficiary of this change in residency would be
Exor SpA (EXO.MI), an Italian investment company that's the single
biggest shareholder with a 30.01% stake. Exor manages the wealth of
the Agnelli family, which founded automaker Fiat SpA (F.MI), the
sister company of Fiat Industrial.
Fiat Industrial, whose headquarters are in Turin, Italy, will
make the request to the U.K. after it buys out shareholders of the
remaining 12% of U.S. subsidiary CNH Global NV (CNH) it doesn't
already own, which is expected by the third quarter.
In an operation to simplify its structure, Fiat Industrial will
fold itself and the CNH into a new company, creating one of the
world's biggest makers of capital goods. It will then give it a new
name and list its stock in New York and Milan.
The new company will be incorporated in the Netherlands, as had
been CNH, even though it'll have its headquarters in the U.K.
Although CNH was incorporated in the Netherlands, it still has
its head offices in the U.S.
The Netherlands has a withholding tax rate of 15%.
Write to Gilles Castonguay at gilles.castonguay@dowjones.com;
Twitter: @GRCastonguay