By on January 29, 2014

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Now that Sergio Marchionne has succeeded in joining Fiat and Chrysler together, for his next act he’s planning on moving Fiat’s headquarters out of Italy. While such a move has tax advantages, it would present a political and public relations challenge for Fiat and Marchionne in their home country. According to Reuters, the new entity, dubbed Fiat Chrysler Automobiles, will be a Dutch-based company with a UK tax domicile, while shares are listed on the NYSE with a secondary listing in Milan.

Marchionne is aware that locating the headquarters outside of Italy, where Fiat has operated for 115 years and has received government funding, or outside the United States, where Chrysler was bailed out by the federal government, could make waves and there is the possibility that the Italian government might intervene. “I’ve seen weirder things happen,” Marchionne said to journalists at the recent Detroit auto show. “So I sincerely hope they don’t create obstacles.”

The deal for Fiat to take complete control of Chrysler after buying the UAW retiree health benefits trust’s stake in the Auburn Hills based automaker was consummated last week and the result is the world’s 7th largest automaker, holding brands that include ,Alfa Romeo, Dodge, Ferrari, Jeep and Maserati along with the two corporate brands.

Marchionne is emulating what he did when he spun off CNH Industrial from Fiat: register the group in the Netherlands with a UK tax domicile. Marchionne has previously said that CNH Industrial will be used as “one of the technical blueprints” for Fiat-Chrysler. CNH is registered in the Netherlands, tax-resident in Britain and traded primarily on the New York Stock Exchange, with a secondary listing in Milan.

Marchionne, who trained as a tax accountant before attending law school by training, will present his plans to the Fiat board of directors today. Publicly he has insisted that moving the HQ and listing on the NYSE reflect “access to funding” more than tax considerations, saying that profits are taxed where they are made with “no impact” on the Italian government’s tax revenue. Because of tax credits for previous years’ losses, Fiat will not have to pay domestic Italian taxes for years to come. Still, to reduce tax burden, manufacturers can adjust the amounts of total profit attributed to the production, export or sale of each vehicle in different countries.

 

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22 Comments on “Marchionne’s Choice of Fiat-Chrysler HQ Weighs Political Realities Against Lower Taxes...”


  • avatar
    mjz

    Everything Sergio does is with the blessing of the Agnelli family. I think this merger is just the tip of the iceberg. Sergio will merge FSA with: PSA, Opel, Suzuki, Mazda (?) to create a global automotive powerhouse to rival VW. He is just as ego driven as Dr. Piech. Their headquarter location will be irrelevant.

  • avatar
    Pch101

    While the tax issues are certainly relevant, there also seems to be a symbolic effort to gain leverage against the Italian government.

    Marchionne believes that the primary mission of the company is to sell cars, while the Italians believe that its main purpose is to provide jobs to Italians. Becoming less Italian aids with that repositioning agenda.

  • avatar
    Aleister Crowley

    Now that Fiat Chrysler is a British company, they can’t use this ad anymore:

    http://www.youtube.com/watch?v=BqpJvey-7-s

    Now the British will be driving the Challenger and George will be the one retreating.

  • avatar
    Viquitor

    Good move. Even Petrobras is dutch these days.

  • avatar
    Lou_BC

    This should confuse the “buy American” “foreign is bad” Nationalistic types that are abundant in the pickup truck ranks….

    A Mexican built Ram with an American Cummins with a Japanese Aisin transmission owned by an Italian company headquartered in the Netherlands with a UK tax centre and a WallStreet stock offering…… oh and a Italian/Canadian CEO.

  • avatar
    Omnifan

    Unless Fiat wants to reimburse the Government for the billions that they DIDN’T repay, then it should be incorporated here in the U.S. so they can pay U.S. taxes to repay the Government for its investment.

    Time to lobby Congress to take action!!

    • 0 avatar
      pgcooldad

      That debt is owed by the old Chrysler Corp. That company went bankrupt in 2009. FIAT bought pieces of that company and formed a new one.

    • 0 avatar
      SC5door

      How about lobbying Congress to do something about, oh say Apple:

      http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?pagewanted=1&_r=0

      At least FCA is still manufacturing cars in the United States, not to mention using suppliers based in the United States as well. All of those smaller companies are paying taxes as well.

  • avatar
    Adam

    Oddly enough, I’ll be visiting Turin in mid-February, and I had planned to check out some of the historical sites regarding the long history of the automobile there. On top of that I drive a Dodge. Small world I suppose.

  • avatar
    Lou_BC

    @Omnifan – you misted the part where Marchione said “profits are taxed where they are made”.


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