Fiat reaches settlement with Italy tax agency over Chrysler value claim

MILAN (Reuters) - Fiat Chrysler <FCHA.MI> has reached a settlement with Italian tax authorities over the valuing of its U.S. Chrysler business involving no cash payment or penalty, the group's chief financial officer said.

In December the carmaker challenged a claim by the Italian tax agency saying it had underestimated the value of its U.S. business by 5.1 billion euros (£4.3 billion) after acquiring Chrysler.

According to a source at the time, the agency's audit of transactions dating back to 2014 could have left FCA facing a tax bill of $1.5 billion.

In comments by CFO Richard Palmer on fourth quarter results seen in a transcript, Palmer acknowledged the tax agency had issued an audit report, proposing to increase the taxable gain on the transfer of Chrysler to Fiat as part of the 2014 merger.

"Under the terms of the settlement we agreed to increase the taxable gain by 2.5 billion euros," Palmer said.

He added that would be wholly offset by 400 million euros of tax losses, previously forfeited, and 2.1 billion euros of Italian tax loss carry-forwards.

"As a result, we have no cash or P&L impact and no financial statement impact, apart from the reduction in unrecognised deferred tax assets," he said.

(Reporting by Stephen Jewkes and Giulio Piovaccari; editing by Jason Neely)