Louis Vuitton’s parent company LVMH Moët Hennessy Louis Vuitton is off of the hook in the tax case that saw French officials raid the Paris offices of the world’s largest luxury goods conglomerate in September 2019 in connection with “suspicions” that it was pretending to carry out treasury operations in Belgium – as opposed to its French headquarters – in an effort to lower its tax bill in its home country. On the heels of an oral argument before the Paris Court of Appeal in June, during which LVMH’s counsel asserted that the raid and seizure of internal correspondences ran afoul of the law, a panel for the Appeals court sided with LVMH.
As first reported by Bloomberg, the Paris appeals court held on September 9 that LVMH Finance Belgique – the conglomerate’s 12-year old, Brussels-located subsidiary, which is tasked with providing financial services, such as managing LVMH’s short-term treasury notes program – “appeared to have enough staff to carry out its treasury activities, rebuffing an argument brought forward by French tax officials” that the group was essentially using the Belgian off-shoot as a mere mailing address.
In addition to finding that French authorities’ 2019 raid on its Paris office – which saw them gain access to more than one million LVMH-related emails – was based on an “unfounded” presumption of fraud, the court further asserted that merely “pointing out that the unit filed no tax returns in France is not enough to warrant raids given that it holds accounts in Belgium, where it is based.”
Counsel for LVMH previously argued before the Paris Court of Appeal that the documentation that tax authorities presented to the court in order to get a warrant to raid the LVMH headquarters violated French tax-secrecy and privacy rules, particularly in connection “data concerning the head of [LVMH’s] Belgian unit.” More than that, LVMH – which is “one of the largest taxpayers in France” – alleged that its Belgian finance arm is hardly a shell company aimed at enabling the luxury giant to rig the tax system. In fact, counsel for LVMH claimed that the Belgian unit “occupies half a floor in a big tower in Brussels” and employs at least six full-time employees.
Other Issues in Belgium
Hardly the first time that LVMH has been taken to task over its dealings in Belgium, the group’s chairman Bernard Arnault sought Belgian citizenship in 2012, right around the time that then-president François Hollande announced a plan to impose a 75 percent income tax rate on the nation’s highest earners. Arnault insisted that the move was not aimed at escaping French taxes (including speculation that such citizenship would have allowed his children to avoid paying inheritance taxes in France). He ultimately withdrew the application, but not without facing widespread backlash, including from Hollande.
Still yet, Arnault settled with Belgian prosecutors in June 2017 in connection with a case opened in 2012. The matter centered on the chairman’s transfer of his entire 31 percent stake in his private family holding company, Groupe Arnault (a sum that French publication Libération reported at the time was worth as much as 6.5 billion euros) to Pilinvest, a private Belgian entity that he maintains, thereby, raising red flags from a tax perspective. In light of the December 2011 transfer and the preferable tax treatment in Belgium, which observes an inheritance tax of only 3 percent compared with 11 percent in France, and no wealth tax, unlike France, Belgian authorities initiated a criminal probe.
Reports stated at the time that Pilinvest was set up in Belgium just as France prepared to introduce a 75 percent supertax, which a spokesman for LVMH contradicted, asserting that Pilinvest was created in Belgium in 1999, had operated as a holding company since then, and “has always respected current legislation and has a tax agreement with Belgian authorities.”
Fast forward five years to June 2017, and the parties managed to settle the matter, albeit “without any prejudicial admission of guilt on [Arnault’s] part,” prosecutors confirmed, without offering any further details.
LVMH owns more than 70 different luxury brands, from fashion houses and beauty brands to wine and spirits companies, and generated $59.1 billion in revenue in 2019, alone.