Investigation: How Billionaires Park Vast Wealth In Tiny, Tax-Light Luxembourg

Forbes spent months digging into how and why some of the world’s richest have parked​ nearly $30 billion of assets—from airplanes and helicopters to vineyards and luxury hotels—in holding companies in the European financial hub half the size of Delaware.

IN August, French mogul Bernard Arnault—the world’s third-richest person and the chairman of luxury conglomerate LVMH—sold his 5.5% stake in French retailer Carrefour for about $850 million. According to annual reports, he owned most of those shares through Cervinia Europe, a company registered in the tiny European country of Luxembourg. Arnault established Cervinia Europe in 2013 and then transferred part of his Carrefour stake to the firm from another Luxembourg entity, Blue Capital S.a.r.l., which he had set up to hold his Carrefour shares in 2007, when he first purchased a 9.1% stake.

Those aren’t Arnault’s only assets held through Luxembourg, a financial hub half the geographic size of Delaware. Outside of the Carrefour stake, he owns more than two dozen Luxembourg-based entities that held $1.6 billion in private investments as of December 2020. Some notable benefits: If Arnault liquidates Cervinia Europe, he can keep the proceeds (and the cash from selling the Carrefour shares) tax-free. And thanks to Luxembourg’s 100% tax exemption for dividends—a break that kicks in after a holding company has kept at least $1.4 million worth of stock, or 10% of a company’s shares for a year—he may have collected nearly $900 million in Carrefour dividends since 2007 tax free. A spokesperson for Arnault declined to comment.

He may be the richest person investing via Luxembourg holding companies but he’s hardly the only one. Luxembourg is favored by billionaires and rich investors for its lightly regulated holding companies, wealth-friendly tax regime and abundance of tax attorneys, accountants and advisors—and until two years ago, its relative secrecy. 

In March 2019, the country’s authorities launched a public business registry to track the beneficial ownership of all companies, complying with a 2016 European Union directive that came in the wake of the International Consortium of Investigative Journalists’ Panama Papers investigation into hidden offshore wealth. Even though compliance is so far incomplete, the registry has already revealed the ownership of more than 140,000 companies registered in a country that’s home to only 626,000 people.

In 2021, the nonprofit Organized Crime and Corruption Reporting Project (OCCRP) and the French newspaper Le Monde scraped the registry’s website and made the data searchable by an individual’s name. In collaboration with Le Monde and OCCRP’s OpenLux project, Forbes dug through the database and found that dozens of the world’s wealthiest individuals—including two of the 20 richest—store billions of dollars in assets in Luxembourg-based holding companies. Among the previously unreported billionaire assets held through these entities are luxury hotels in the Italian Alps and the Caribbean island of St. Barts, French vineyards, yacht marinas on the Adriatic coast and at least $29 billion worth of public stocks, private companies and real estate located on multiple continents.

“In Luxembourg there’s this gray zone, where private individuals use companies to store some of their wealth,” says Jan Fichtner, a senior research fellow at the University of Amsterdam who studies offshore financial centers. “It has political stability and a very developed legal apparatus.”

Luxembourg’s history as a financial hub began in July 1929, when the government passed a law, aimed at attracting international investors, that allowed anyone to establish a financial holding company exempt from taxes on income, dividends and capital gains— all with its ownership undisclosed. Barely three months later, the Wall Street crash of October 1929 plunged the global economy into the Great Depression and dashed Luxembourg’s hopes of becoming a financial center.

In 1963, Luxembourg tried again. It pioneered the listing of eurobonds—bonds issued by a company outside of its home market—in a move that attracted major corporations and wealthy families, made holding companies more popular and set off a boom in its financial services industry. The country’s permissive laws governing financial holding companies—known as Soparfi (short for société de participations financières)—also remained largely unchanged until 2006, when the European Commission required Luxembourg, a founding member of the EU since 1951, to repeal the original 1929 law.

Since 2011, after a four-year grace period, Soparfi have been subject to local corporate and business taxes, but they remain a common type of unregulated investment company favored by foreign investors—and retain certain crucial tax advantages. Luxembourg also has tax treaties with several countries—including the United States, China, Russia and all EU members—that make it an attractive place for investors seeking to reduce their tax burden by incorporating their holding companies there.

“Luxembourg attracts investors of diverse profiles and preferences by offering a wide range of investment vehicles—from plain vanilla, non-regulated corporations, to lightly regulated [investment companies], to highly supervised investment funds,” says Xavier Martinez, a tax partner at KPMG. “While fully compliant with the EU’s latest anti-tax avoidance and administrative cooperation regulations, [Luxembourg] is constantly innovating to provide a competitive and business-friendly environment.”

Forbes found two common ways billionaires have been using Luxembourg holding companies to invest in assets elsewhere. Some, such as Arnault and Spanish fashion tycoon Amancio Ortega, hold public stocks, private companies or real estate through Luxembourg holding companies, potentially taking advantage of Luxembourg’s dividend tax exemption. Others, such as Russian metals baron Mikhail Prokhorov and Italian billionaire John Elkann, hold smaller assets such as hotels or private firms through Luxembourg companies, sometimes liquidating them (tax-free) after cashing out on their investment.

For billionaires with large holding companies incorporated in Luxembourg, the key benefits are the ability to reinvest dividends and capital gains tax-free in other assets. According to a tax attorney in Luxembourg, dividends earned by Luxembourg holding companies are indeed commonly reinvested tax-free, allowing investors to take advantage of the 100% dividend tax exemption.

Setting up shop in an offshore center isn’t a significant expense. It costs about $5 million to $10 million to establish an entity and move money through it in the most common jurisdictions, according to Thom Townsend, executive director of the corporate transparency nonprofit OpenOwnership.

Forbes reached out to the billionaires with assets in Luxembourg cited in this article; they either declined to comment or did not respond. Here are the European billionaires and the Luxembourg holding companies belonging to them:

• In addition to the $1.6 billion in assets held in Luxembourg-based entities, Bernard Arnault owns a previously unreported 28% stake in L Catterton, a private equity firm he’s backed alongside LVMH since 2016. L Catterton manages $30 billion in assets, including stakes in fitness brands Equinox and iFIT, German sandal maker Birkenstock and some $460 million worth of real estate investments through Luxembourg-based L Catterton Real Estate. Forbes estimates Arnault’s personal stake in L Catterton is worth around $380 million. (LVMH owns 12%, while the firm’s co-CEOs, J. Michael Chu and Scott Dahnke, each hold a 30% stake worth an estimated $405 million apiece.) Arnault, Dahnke and Chu may also have personally invested in L Catterton’s various funds; the firm would not comment on who has invested in the funds it manages.
• Amancio Ortega, the cofounder of Spanish retail chain Zara and its parent, fast fashion powerhouse Inditex, owns $3.7 billion in real estate in the United Kingdom through two Luxembourg-based companies, Adelphi Property S.a.r.l. (99.99% owned by Ortega) and Hills Place S.a.r.l. (99.7% owned by Ortega).

• Giovanni Ferrero, Italy’s richest person, owns 75% of his family’s Luxembourg-based namesake confectionery empire, Ferrero International S.A., a stake worth an estimated $32 billion. He also owns Luxembourg-based entities—including the family’s private investment fund, Teseo Capital—that hold more than $23 billion in investments in private companies, real estate, stocks, bonds and other assets in countries including Australia, Chile and South Africa. The Ferreros also have a Monaco-based family office, Fedesa, with a research office in Singapore.
• Leonardo Del Vecchio, Italy’s second-richest person, holds the bulk of his and his family’s net worth—more than $37 billion in public stocks including eyewear giant EssilorLuxottica, Italian investment bank Mediobanca and French real estate investment trust Covivio—through Luxembourg-based Delfin S.a.r.l. Forbes found that Delfin also owns at least $60 million in other assets, including real estate on the French Riviera and in Luxembourg, a marina for luxury yachts on Italy’s Adriatic coast and a $48 million Gulfstream G650 jet it rents to private charter airline Global Jet (Delfin also owns a 13% stake in Luxembourg’s flag carrier Luxair, acquired for an undisclosed amount in 2015). Forbes also calculated that Del Vecchio has earned at least $5 billion in dividends from public stocks through Delfin over the past decade, possibly tax-free. Italy taxes dividends at a minimum rate of 26% and France at 30%, meaning Del Vecchio could have saved nearly $1 billion in taxes by collecting dividends in Luxembourg and reinvesting them. (Unlike the United States, most European countries don’t tax citizens’ income earned outside the country.)

• French billionaire Carrie Perrodo, who inherited her late husband Hubert’s oil company Perenco after his death in 2006, owns her family’s impressive winery investments through holding companies registered in Luxembourg. Through a trust based in the Caribbean island nation of St. Kitts and Nevis, she and her three children—François, Nathalie and Bertrand—own Margaux Vignobles Investments S.a.r.l., a Luxembourg company that owns the 70-hectare Château Labégorce winery in the Bordeaux region of France and 22.63% of the Taittinger champagne estate, with a stated collective value of nearly $250 million in December 2019. Through three Bahamas-based trusts, her children also share ownership of two Luxembourg-based firms that own a 62% stake in French media group Konbini (worth $21 million in 2019) and 9.5% of French software-as-a-service startup Wynd (worth $24 million in 2019), as well as smaller investments in Israel and Germany.

Other billionaires use Luxembourg more sparingly, establishing holding companies to invest in a luxury hotel or take a small stake in a private company. Luxembourg doesn’t tax the holding company’s liquidation proceeds, and its capital gains are also tax exempt as long as it held at least a 10% stake in the company or shares worth $7 million for at least 12 months—meaning any billionaire who sells an asset and then liquidates the company that owned it may get to keep the spoils tax-free. Forbes found several previously unreported luxury real estate holdings and private investments owned by billionaires through Luxembourg entities. These include:

• John Elkann, a scion of Italy’s wealthy Agnelli family and CEO of Exor, the conglomerate that owns the family’s stakes in automakers Stellantis and Ferrari, invested in Monaco-based helicopter airline Monacair through Luxembourg. He held a 25% stake in Eola Luxembourg S.a.r.l., which in turn owned half of Monacair, until he and his business partners—three members of Monaco’s royal family—sold their stakes in Eola in 2018 for about $1 million and liquidated the company one year later.

• Russian pharmaceuticals billionaire Viktor Kharitonin owns the 4-star Lajadira hotel in the Italian Alpine resort town of Cortina D’Ampezzo (worth $27 million in 2020) through Luxembourg-based Mountain Resorts S.A.

• Russian billionaire Mikhail Prokhorov, former part-owner of the NBA’s Brooklyn Nets, owned two entities in Luxembourg (through a Cyprus-based firm named Flister Limited) which together held real estate worth about $2.2 million in Gaillard, a small town on the French-Swiss border near Geneva; he dissolved both companies in December 2020.

• The five children of American private equity billionaire David Bonderman own Luxembourg-based Irenne S.a.r.l through Lucayan Partners L.P., a limited partnership based in Texas and registered in Delaware. Irenne owns the 5-star Rosewood Le Guanahani resort in the Caribbean island and French territory of Saint Barthélemy, better known as St. Barts, and had total assets of $122 million in December 2019, the last date for which information was available.

Before the public registry opened in 2019, Luxembourg also provided these investors with a degree of secrecy. That’s gone, and may soon be eliminated in several other offshore havens: a number of Caribbean financial hubs often used for their secrecy, including the Caymans and the British Virgin Islands, have pledged to establish public beneficial ownership registries by 2023.

The United States has emerged as an alternative for the privacy-seeking rich. Home to choice jurisdictions for secretive trusts such as South Dakota, the U.S. does not have any plans to establish a public registry—though in January, Congress passed the Corporate Transparency Act, which requires the Treasury Department’s Financial Crimes Enforcement Network to establish a first-of-its-kind beneficial ownership registry in the U.S. by January 2022. But it will only be accessible to law enforcement, federal agencies and certain financial institutions, not to the general public or private litigants, such as creditors or soon to be ex-spouses.

The reality is that the world’s wealthiest have been parking ownership of assets in places like Luxembourg—and South Dakota—for decades, in ways that have been hard to trace. Some of that may have changed as a result of the Luxembourg registry. At least that’s what many hope.

“You can have a [company] in the Netherlands owned by an entity in Luxembourg, owned by an entity in the Cayman Islands which is owned by a trust in the British Virgin Islands. As you increase the size of the chain, it’s basically impossible to know who’s investing in this company,” says Javier Garcia-Bernardo, an assistant professor at Utrecht University and a former data scientist at the nonprofit Tax Justice Network. “That’s why these beneficial ownership registers are really important.”

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