Volkswagen is in “advanced talks” with United States authorities over a proposed settlement in its diesel emissions scandal under which the company would pay $US4.3 billion ($A5.8 billion) in criminal and civil fines.

The draft settlement with the US Department of Justice and US Customs and Border Protection would include the appointment of an independent monitor to oversee the company’s compliance and control measures for three years.

A company statement issued on Tuesday said under the proposal Volkswagen would agree to “a guilty plea” to criminal law provisions.

The draft needs to be approved by Volkswagen’s boards and US courts.

Volkswagen said its management board of top executives, which includes CEO Matthias Mueller, and its board of directors would deal with the issue “in the very short term,” as soon as Tuesday or Wednesday.

“A final conclusion of the settlement agreement is further subject to the execution by the competent US authorities and to the approval of the competent US courts,” the company said.

The penalties would exceed the amounts Volkswagen has set aside to cover costs from the scandal, but the specific impact on 2016 earnings “cannot be defined at present,” the statement said.

Volkswagen had already deducted 18.2 billion euros from earnings to account for the expected costs of fines, settlements and recalls.

The company has admitted equipping diesel cars with software that turned up emissions controls when the car was being tested, and turned them down during normal driving, improving engine performance but exceeding emission limits.

Volkswagen has reached a $US15 billion civil settlement with environmental authorities and car owners in the US under which it agreed to buy back up to 500,000 vehicles.

Volkswagen, Audi and Skoda vehicles were implicated in the diesel emissions scandal in 2015. Photo: Getty

The company also faces an investor lawsuit and criminal probe in Germany. In all, some 11 million vehicles worldwide were equipped with the software.

The scandal was revealed in September 2015, when the US Environmental Protection Agency issued a notice of violation. CEO Martin Winterkorn resigned and was replaced by Mueller.

The company has apologised and brought in US law firm Jones Day to investigate.

Oliver Schmidt, the company’s former head of US environmental compliance, was arrested over the weekend in Florida. Another employee, engineer James Liang, has pleaded guilty in the criminal case.