Porsche faces German tax probe over marketing and catering expenses

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Volkswagen AG’s Porsche sports car unit is under investigation by the Stuttgart tax office over the way it accounted for marketing and catering expenses during the past 8 years, according to people familiar with the matter.

The expenses amount to as much as 1 billion euros ($1.2 billion), but the financial hit for the company will be significantly smaller, said the people, who asked not to be identified as the matter is confidential. Porsche has already paid a substantial amount since the probe started last year and may have to make another payment close to 100 million euros, according to the people.

The Stuttgart tax office on Friday confirmed in a written statement to Porsche seen by Bloomberg that the probe is related to an administrative offense, not a criminal one, which would have potentially implied a more severe financial penalty. A spokesman for the tax office declined to comment when contacted by Bloomberg by telephone.

“We confirm that on Wednesday, June 27, and on the following day, tax officers secured documents in the offices of Porsche AG in connection with an investigation into administrative wrongdoing,” the company said in an emailed statement on Friday. Porsche “is fully cooperating with the authorities,” it added, declining to comment further as the probe is ongoing.

Legal Woes

While the financial fallout from an administrative tax offense appears manageable, the case adds to the legal woes afflicting parent company Volkswagen in the wake of the diesel-emissions cheating scandal that came to light almost three years ago. The chief executive officer of VW’s Audi premium-car unit, the group’s biggest source of profit, was taken into custody by Munich prosecutors last week and has been suspended.

As well as official investigations, thousands of disgruntled shareholders and customers have sued VW for damages and the company is dealing with legal claims in 55 countries. Earlier this month, it agreed to pay a record 1 billion euros to end an investigation by prosecutors in the German city of Braunschweig related to emissions cheating.

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