UPDATE 1-Italian tax authorities probe Glencore's Sardinia plant
* Glencore says transactions in line with Italian tax laws
* Police say have uncovered over 120 mln euro tax evasion
* Tax police do not name company involved
MILAN, June 10 (Reuters) - Swiss commodities trader Glencore said on Monday Italian tax authorities were investigating some transactions involving its plant in Sardinia.
The news came after Italian tax police said they had uncovered tax evasion to the tune of more than 120 million euros ($159 million) at a metals producer on the island of Sardinia.
The tax police did not name the company involved, but said it was controlled by a Swiss-based international group.
A source close to the matter told Reuters the business belonged to Glencore.
Glencore, which owns a lead and zinc smelter at Portovesme in Sardinia, said the Italian tax authorities were reviewing transactions between the company and that plant.
"All transactions were conducted in accordance with applicable Italian tax laws," it said in an emailed statement.
The tax police said they were investigating a Sardinia-based business that had in recent years evaded payments through "an audacious policy of 'transfer pricing'" - buying raw materials at an inflated price from its Swiss parent.
Transfer pricing involves moving goods and services across international borders from one corporate unit to another.
The Italian company had never declared any profits, only tax losses, since it had been set up, the police said.
They added this was "an anomalous situation given the important international role and profits recorded by the parent Swiss group."
Portovesme is located in one of Italy's poorest regions with a high unemployment rate.
Glencore last year suspended talks with Italian authorities over a possible offer for an Italian plant in the area being closed by U.S. aluminium maker Alcoa.
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