How Italian jewellery giant Bulgari struck tax gold

Apple and Google are names regularly cited when it comes to using Ireland for aggressive tax planning, but the practice is open to a much wider range of businesses.

Bulgari, the Italian jewellery giant whose products were made famous by Elizabeth Taylor, routed €680 million in revenues last year through its Irish unit.

The company was recently at the centre of a corporate tax avoidance investigation by Italian authorities that resulted in Bulgari making a settlement of €42 million.

Bulgari Ireland, which provides logistics, sales and “intra-group finance” services to the group, one of the world’s largest jewellery chains, made a profit before tax last year of €67.8 million, according to recently-filed accounts.

Dividend

The Irish unit paid a dividend of €70m to its Italian parent company, which is controlled by

LVMH

, the listed luxury goods giant which bought it for €3.7 billion in 2011. It paid Irish corporation tax of €8.6m.

An analysis of Bulgari Ireland's sales, which were down 11 per cent on the previous year although profits remained steady, show its revenues derive from Italy and elsewhere in Europe, Asia, the Americas and the Middle East.

More than half of its revenues are listed as “intercompany sales”, with the rest coming from franchisees. Bulgari has about 300 high-end stores globally. About 125 are operated by franchisees with the remainder run by the group.

Bulgari Ireland's listed address in Dublin is the same as the offices of the law firm Matheson, although Bulgari also rents a unit in the north side of Dublin's docklands near the IFSC. Its accounts state Bulgari Ireland has 76 staff.

Three directors

Its three directors include Dublin-based

Massimo Paloni

, who runs the Irish operation, Irish-born former investment banker

Brian Cooper

, and

Isabelle Haeberli Sedira

, who is based in Switzerland. Mr Cooper declined to comment on its accounts.

Bulgari Ireland was last year at the centre of a tax probe launched by Agenzia delle Entrate, Italy’s inland revenue service, which alleged it was used to shield profits on €3bn of sales between 2008 and 2011.

The authorities accused the group, which has always denied any wrongdoing despite making a settlement, of using the Irish unit as part of a tax avoidance scheme that also involved its Swiss operation.

The authorities, who have launched several similar cases against other Italian luxury goods outfits such as the Giorgio Armani group, pressured Bulgari by seizing some of its assets and investigating its founding family.

Bulgari made a €42m settlement with Agenzia delle Entrate in February of this year, but insisted it had done nothing wrong.

*The Bulgari Group has pointed out that the Italian tax authorities, the Agenzia delle Entrate, has recognized Bulgari Ireland as a fully operational company. The €42 million settlement paid to the Italian tax authorities is, the group says, not related to Bulgari Ireland’s operations. Bulgari Ireland, it adds, pays the standard Irish corporate tax rate and conducts its tax affairs both legally and ethically.

*This article was edited on Thursday, September 25th, 2014