MILAN (Reuters) - Fiat Chrysler Automobiles (FCA) (MI:FCHA) has challenged Italy's tax authority which has said the car company had underestimated the value of its U.S. business after it bought Chrysler.
On Wednesday, a source close to the matter said the Italian tax agency believed FCA had underestimated its business in the United States after its phased acquisition of Chrysler by 5.1 billion euros.
"We strongly disagree with this preliminary report," an FCA spokesperson said on Thursday.
The tax audit comes at a delicate time for the carmaker which is finalising talks with PSA (PA:PEUP), the maker of Peugeot and Citroen, over a planned $50 billion (39 billion pounds) merger to create the world's fourth-largest automaker.
The audit, which concerns transactions dating back to 2014, could result in FCA having to pay back taxes for $1.5 billion, the source said.
"We are confident we will successfully make the case for a material reduction in the assessment," the FCA spokesperson said.
In its third-quarter report in October, FCA said Italy's inland revenue had issued the company with a final audit report in October this year.
If confirmed, the audit could result in a material proposed tax adjustment relating to the 2014 merger of Fiat into FCA NV, it said.
"Any remaining taxable gain assessed would be offset by carry forward tax losses with no material cash outflow or impact on earnings," the FCA spokesman said on Thursday.
At 0944 GMT FCA shares were down 0.7%.