Bernard Arnault Withdraws Belgian Citizenship Bid

Bernard Arnault | Source: Pursuitist

PARIS, France — Bernard Arnault, France’s richest man, has abandoned attempts to obtain Belgian nationality and will keep paying tax in his native country after months of speculation that he, like movie star Gerard Depardieu, wanted to dodge a 75-percent supertax. The head of the LVMH luxury goods empire, whose citizenship request looked doomed, announced his decision in a newspaper interview, saying he had never intended to flee the taxman.

“That message never sank in. Today I’ve decided to bring the confusion to an end. I am withdrawing my request for Belgian nationality,” Arnault told daily Le Monde.

News last year that he had lodged the request sparked angry accusations from French Socialist leaders and other left-wingers that he lacked patriotism at a time when Europe’s second-largest economy was at a standstill and creaking under huge debts. Arnault’s request for Belgian nationality appeared in doubt after a Brussels court in January handed down a negative opinion on it to the Office of Foreigners immigration office, Belgian media quoted the office’s spokesman as saying.

Arnault said his frustrated efforts to acquire nationality in Belgium were motivated not by tax concerns but a desire to tie up legal ownership issues so that his children would not fight over the riches he would one day leave to them.

“Given the situation the country is in, the recovery effort needs to be shared, and with this gesture I hope to show my attachment to France and confidence in its future,” he said.

The LVMH chief executive said LVMH paid more than a billion euros in tax on profit in France, more than half of its total tax bill, even though 90 percent of its sales were abroad.

While refusing to reveal his personal tax bill he said he was “undoubtedly one of France’s top taxpayers”.

Socialist President Francois Hollande promised a 75-percent supertax on incomes over a million euros per year when he came to power last May. But after a top court slapped down the initiative, Hollande said in March he was modifying that plan to have companies pay the tax for employees paid more than a million euros, rather than have individuals paying it themselves.

Arnault said he had rejected moves by some of his employees to seek tax residence outside France.

“Some of them asked to be domiciled outside France but I resisted,” he told Le Monde.

Actor Gerard Depardieu, the star of moves such as Green Card and Cyrano de Bergerac, was accused by French leaders last year of making a “pathetic” attempt to dodge the taxman when he bought a house across the border in Belgium. He responded furiously, publicly accepting an offer of Russian citizenship from Russian President Vladimir Putin.

Arnault said the 75-percent tax would not raise a lot of revenue but should prove less divisive now that it was set to be levied on firms rather than people and only due to stay in place for two years.

France’s premier football league says the tax will probably raise 82 million euros from its soccer clubs.

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2 comments

  1. “wanted to dodge a 75-percent supertax” shame on Reuters. I am not one to defend a billionare but Arnault has been pretty open about this and justifies the move to better position LVMH for his departure (death) so the company is not fractured when he hands it off to his kids.

    Josh from New York, NY, United States
  2. As an international tax lawyer who assist HNW individuals like Mr. Arnault in organizing their residence/citizenship and domicile in order to reduce their global tax burden, I would venture to speculate that there is much more to this story than first meets the eye

    Actually, I would guess that Mr. Arnault is being as clever as ever. Consider the fact that he applied for Belgian residence over 6 years ago. He did not need to do this in order to reside in Belgium since he is a French citizen and has the RIGHT to reside in Belgium without the need for getting a residence permit. However, he did need to have residence in order to eventually apply for Belgian citizenship.

    Why would he need a Belgian citizenship in addition to his French citizenship? A Belgian citizenship would give him the option of dropping his French citizenship and retaining an EU citizenship, should France ever decide to adopt a US style “citizenship based taxation” system.

    By having an EU citizenship, Mr. Arnault would retain the ability to move immediately to a more tax favourable EU destination such as the UK (resident non-domiciled remittance taxation), Monaco or Switzerland (forfeit fiscale lump sum taxation).

    Of course, 6 years ago he would have no idea that Hollande would be elected or promise a 75% tax rate. He also did not know for certain that France would adopt a citizenship based taxation (which they are talking about but have not implemented). He was simply looking at the reality that the French government (no matter who was at its head) would need more tax revenue simply to meet increasing entitlement program costs for an aging population. As the wealthiest man in France, a country which has a progressive tax system, he knew that this would mean a significant tax hike for him.

    He quietly applied for Belgian citizenship last year and would probably have gotten it, if he didn’t have such a famous name. He was “outed” in the press and his plan became a “cause celeb”. The Belgian government was pressured by their own citizens and the French government to strictly apply their physical presence test for naturalization and not exercise the discretion they would normally have used to grant him citizenship. They rejected his initial application and the courts upheld the rejection.

    By withdrawing gracefully from a battle for Belgian citizenship that he was probably going to lose anyway, he has retained his public image. Since his original concern and strategy were sound, he is probably now considering a different tack. Luckily for him, there are major governments who would be quite open to a grant of citizenship to him, if they are properly approached.

    Why should the average person concern themselves with Mr. Arnualt’s actions? It is important because the US, like France has the same reality of entitlement programs meeting an aging population. The US also has a progressive tax system which always results in a dangerously unstable business model of extreme overreliance on a small number of taxpayers to supply an extremely high percentage of the total tax revenue. Typically the top 1% account account for over 30% of the total tax revenue. In the US, the top 400 taxpayers account for about 2% of the total revenue. This is just a fact whether you think the system is “fair or unfair”. It is the fear of losing one of these “super taxpayers”, that causes the visural reaction when there are stories about people like Bernard Arnault, John Paulson or Eduardo Saverin considering leaving their current tax jurisdiction.

    DavidSLesperance from Gdynia, Pomeranian Voivodeship, Poland