Plans to shift Fiat HQ out of Italy may face obstacles

Article by Christian Andrei, on January 29, 2014

Fiat chief executive Sergio Marchionne is about to disclose his next move to further improve business at the struggling carmaker – shifting the company’s headquarters out of Italy. Sources privy with Fiat told Reuters that Marchionne is likely to shift the headquarters to the United Kingdom, which is more tax-friendly than Europe.

Marchionne is also planning to have its primary share listing in New York. He is carefully considering his next moves, since the Italian government might interfere with his plans as any shift could bad news for the fragile Italian government that is struggling to protect jobs in its territory. "I've seen weirder things happen," Marchionne said at the Detroit Auto Show.

"So I sincerely hope they don't create obstacles." Fiat is now bound to take full ownership of Chrysler after inking an agreement to buy the remaining stake from a UAW retiree healthcare fund for $4.35 billion. The agreement opens the way for Marchionne to merge Fiat and Chrysler to form a global carmaker large enough to compete against other large carmakers.

It would have operations in 40 countries with brands including Alfa Romeo, Dodge, Ferrari, Jeep and Maserati. It is thought that a neutral country base could help secure the merger, learning from the lessons learned with the attempt by Daimler to run Chrysler from Germany. A neutral country like the UK would also give rise to tax-related incentives.

"Where the actual production of cars is not carried out in the UK, the reason for coming here would be largely a tax one," Chris Morgan, partner and head of tax policy at KPMG told Reuters. Experts remarked that registering the merge company in the Netherlands with a UK tax domicile could deprive the United States and Italy of tax revenue of some overseas earnings. The UK has been cutting its corporate tax rate to a proposed 20 percent in 2015 and trimmed the tax burden on profit from foreign units in low-tax jurisdictions.

Topics: fiat, headquarters

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