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It's not tax-dodging, it's protecting the family business: Arnault's citizenship plans

Bernard Arnault’s complicated fiscal dealings in Belgium are all designed to keep luxury goods giant LVMH well under the Arnault family's control and not to avoid France’s proposed 75% super-tax, according to the company.
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Bernard Arnault’s complicated fiscal dealings in Belgium are all designed to keep luxury goods giant LVMH well under the Arnault family's control and not to avoid France’s proposed 75% super-tax, according to the company.

The response from LVMH came as the patriarch of French industry again faced attack from the French public after further details of his financial plans and efforts to gain Belgian citizenship were revealed.

On 24 January, French newspaper Liberation published an article claiming Arnault transferred his majority stake in LVMH – worth an estimated €6.5 billion – to a Belgium-based holding company called Protectinvest in December 2011. He is also still trying to gain dual French-Belgian citizenship, having had his first application denied in December 2012.

According to Arnault, the holding company was set up purely to protect LVMH and not to avoid the new tax planned by Francois Hollande's socialist government. The tax, which has not yet been implemented, will be levelled at incomes of more than €1 million – a blow for Arnault, who is the world's fourth richest man, with a fortune of $40.1 billion (€29.8 billion), according to Forbes. But LVMH has stated that regardless of his citizenship plans, Arnault will remain a tax resident in France.

Protectinvest was set up in 2008, three years before the present government came to power, and the transfer was made six months before Hollande won the election. The holding company prevents Arnault's five children from selling shares until 2023 if Arnault were to die in the next decade, by which time the youngest child would be 25.

His children are also barred from sitting on the board of Protectinvest, as it has a clause stipulating administrators must be over the age of 50. Mr Arnault's two oldest children from his first marriage, 38-year-old Delphine and 35-year-old Antoine, are LMVH directors and he has three sons from his second marriage.

A spokesman for LVMH told the Financial Times Belgium was chosen for Protectinvest because "France does not have in its legal framework the concept of a private foundation, which is why it cannot be established in France".

Arnault's first application for Belgian citizenship was rejected as he did not meet the criteria of having lived in the country for the last three years. But, he may still be granted a passport if he can prove that he has "real links" with Belgium.

LVMH said in a statement published in September: "Bernard Arnault, whose roots are in the north of France, maintains numerous ties with Belgium, be they on the personal and family level, or on a business level."

It continued: "His private interests – Groupe Arnault – has made multiple investments in Belgium and intends to develop them. It is in this perspective that Bernard Arnault has applied for French-Belgian double nationality." Commentators have also pointed out that it is not necessary to be a citizen of Belgium to be a tax exile there.

Arnaud is likely to find out whether his latest citizenship application is accepted or rejected in spring 2013.

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