At the age of 93, crooner Charles Aznavour is still one of themost recognised and famous French entertainers in the world. Yet he has long been unenthusiastic about paying taxes in France. Mediapart has uncovered his – perfectly legal – fiscal set-up which means he and some close family members now pay little tax in France on his royalties.
For the last ten years the veteran singer and his son Nicolas, who today manages most of his father's business affairs, has been using a holding company in Luxembourg to reduce the amount of tax paid in the country where this son of Armenian immigrants was born. The full set up was finally completed at the end of 2016.
It was on March 30th, 2007, that Charles Aznavour's shares in two French companies that manage his royalties – Toy Music and Éditions musicales Djanik – were transferred to a financial holding company in Luxembourg called Abricot S.A. The singer was the only shareholder in it and his assets constituted the vast majority of the capital in it through the shares of those two companies. Abricot S.A, has since become the sole shareholder in Toy Music and owns a 50% stake in Éditions musicales Djanik. These companies' dividends, which up to then had been distributed to Charles Aznavour in France, were then paid to him in Luxembourg.
Enlargement : Illustration 1
This classic form of fiscal structure clearly brings strong tax benefits. The dividends sent to Abricot escape French income tax and are not taxed under Luxembourg law. As Charles Aznavour is resident in Switzerland he can no longer be taxed on his income from his French companies. And as the singer is taxed at a “flat rate” in Switzerland, under a Swiss-Luxembourg tax treaty he does not have to pay the 15% tax at source that would otherwise be applicable in Luxembourg for the dividend payments. In other words Aznavour pays virtually no tax on the dividends he receives from his French companies.
Though Aznavour's French companies no longer have much of a turnover in their own right they do receive the royalties from the artist's songs. Between 2007 and 2015 the amount of money they sent to the Luxembourg holding company Abricot amounted to 1.7 million euros. Of this amount Charles Aznavour only received 130,136 euros if one adds up all the “other exceptional charges” that had to be paid. In the case of holding companies this mostly means the paying out of dividends. Nonetheless it means that, quite legally, more than one-and-a-half million euros escaped French tax on dividends.
The family joins in
In November 2016 Abricot S.A. changed shareholders. Its capital was increased through an injection of half of the shares from Éditions musicales Djanik. But this half represents 71.1% of Abricot's new capital worth. So Charles Aznavour's share in Abricot has gone down to 28.9%. The rest of the capital is now held by members of his family, his wife Ulla, 77 and two of his children; the eldest Seda Aznavour, aged 71, and his youngest Nicolas, 41, who is also manager of Toy Music and Abricot S.A. and president of Éditions musicales Djanik. A nominal share is also owned by the singer's sister Aïda Aznavour.
This modification significantly changes the way in which the singer's wealth is managed. In terms of cash flow, the four new shareholders have all become entitled to all the profits made by Éditions musicales Djanik. They also acquire some rights to Toy Music's profits which hitherto had been reserved just for Charles Aznavour himself.
As for share capital, the 1.31 million euros amassed in profits by Abricot can now go to the family in the form of dividends. Likewise part of the 1.3 million euros made by Toy Music can also be paid to family members as dividends. In other words, part of Charles Aznavour's family can now receive a larger share of the profits from the singer's royalties.
This redistribution of the profits also means that less tax is paid, certainly in France. Only Aïda Aznavou, who has a nominal share in her brother's companies, is resident in France. The performer's Swedish wife Ulla and son Nicolas are both resident in Switzerland and benefit from the same tax advantages as him. The involvement of the performer's family in the holding company will also help when it comes to inheritance and the transfer of the French companies, as it will be carried out under Luxembourg law.
This means that the French tax authorities will have to be content with taxing the profits of the French companies Toy Music and Éditions musicales Djanik. In 2016 these profits amounted to 61,342 euros; in contrast the dividends paid out by the two companies in that same year were 317,000 euros. Using 2016 as a base – it is the last year for which there are full figures – one can then calculate the tax benefits for the Aznavours and the losses for the French tax authorities.
If one applies the new 30% flat rate tax applicable in France from January 1st, 2018, the theoretical loss for the French tax authorities will be around 95,100 euros. Even if one allows for the 3,210 euros in tax on taxable profits in Luxembourg they will pay, the Aznavours will be close to 60% better off. In reality as the tax on dividends in France was much higher up to the end of 2017 the shortfall will be much higher for the French tax authorities. And taking account of the total profits reported by Abricot in Luxembourg and the two French companies the theoretical overall loss to France will be considerable.
Meanwhile the level of dividends paid out by Abricot in Luxembourg has jumped. Abricot's gross profits, which under new Luxembourg accounting rules includes dividends, rose to 76,362.21 euros in 2017. That is 5.2 times more than the 'other operating costs' – in other words dividends – in 2016 which were 14,758.84 euros and which went just to Charles Aznavour.
At the same time the yield from the shares in Abricot went from 233,791.55 euros to 316,967 euros in 2017, an increase of 35.5%. This means that the possible distribution rate of Abricot dividends has gone from 6.31% to 24.1%. So the Luxembourg holding company is paying out more to take account of its new shareholders but is continuing to amass capital reserves.
Everything in this fiscal set-up is perfectly legal but it does highlight the Aznavour family's deep aversion to the French tax authorities. Charles Aznavour has in the past defended his status as a tax exile. In an interview with broadcaster RTL in February 2013 he said: “I reside in Switzerland, I pay my taxes everywhere I work, I pay my taxes in France, I've always paid my taxes in France. Not my taxes on what I do in Germany!”
This claim was false as the singer was already sending to Luxembourg dividends from his French companies to avoid them being liable for tax in France. This set-up also allows death duties in France to be avoided.
Fifty years of aversion to the French tax authorities
Aznavour's aversion to French tax officials is nothing new. According to the well-researched and only unauthorised biography of the singer by Robert Belleret, published in January 2018, the singer's yacht Anouch, which was destroyed by fire on August 7th, 1972, in the port of Mandelieu-La Napoule near Cannes on the French Mediterranean, had officially been bought by his wife's brother in order to avoid paying French VAT. But that is a small detail. The author Robert Belleret explains that the singer considered going to live in Switzerland as early as 1970 and the following year signed an application for a residency permit for the Swiss canton of Valais in the south-west of the country. This was accepted in 1972 and the singer officially set himself up as a resident in a chalet in the small ski resort town of Crans-Montana. The French tax authorities were not impressed.
The French authorities pursued Charles Aznavour over two different matters. One was for non-payment of his taxes in 1972 and 1973 as, according to officials, the singer was not then resident in Switzerland but was in fact living mostly at his home at Galluis south-west of Paris. The other issue was the creation of what the French authorities said were bogus Swiss companies designed to receive the earnings from his royalties that were taxable in France.
In the second affair, involving the bogus firms, Aznavour was eventually convicted on June 29th, 1977, at the criminal court in Versailles, ordered to pay three million francs in damages and interest and given a year's suspended prison sentence. After an appeal by the prosecution the financial penalty was increased on December 9th, 1977, to ten million francs which, allowing for inflation, is the equivalent of around six million euros today. According to Belleret's biography, after an agreement with the tax authorities this sum was never paid in full.
However, in relation to the alleged tax fraud of 1972 and 1973 the case against the singer was dismissed in November 1980. According to biographer Robert Belleret “we don't know what kind of deal took place” with the tax authorities. However in 1977 the French justice system had confirmed that the singer did not have Swiss residency status in 1972 and 1973, something which was implicitly recognised three years later. Speaking about this in December 2013 to French public broadcaster France Info, Charles Aznavour acknowledged, without spelling out any details about the affair, that he had “paid a bit of cash” to some politicians who “were able, it seems, to fix things for me”. He concluded: “It cost me a great deal.”
Charles Aznavour has done all he can to ensure people forget his conviction, in particular by continually repeating that his case was dismissed. Naturally the singer does not point out that this was in relation to another case. The reality is that he has constructed a narrative to preserve his image. Having compared the French tax authorities to the “Gestapo” and having said he was “ruined by the taxman”, he elaborated a tale in which he was hounded out of France because of the authorities' determination to convict him.
In the French version of the biographical section on his foundation's website the singer explains how “in 1976 I decided to take all my family and move to Switzerland because of a misunderstanding between the media, the authorities and me.” The English language version simply refers to moving to Switzerland in 1976. The reference to 1976 is a strange one coming from a man who, in the courts in 1977 and 1980 claimed he had been a Swiss resident since 1972. Without that claim there were no grounds for the dismissal of his case.
Charles Aznavour's bitterness towards the French tax authorities has not diminished over time. Indeed it seems to have been passed on to his family, including his son Nicolas who is now the main organiser of the family's fortune as he runs the main Aznavour companies. Clearly, unlike the arrangements in the 1970s, there is absolutely nothing illegal about the family's arrangements in Luxembourg. They simply show a desire to reduce the family's tax liabilities in France, which lessens the civic image of the great singer himself.
Mediapart sent a series of questions to Nicolas Aznavour via the Aznavour Foundation and to the family's musical publishers Raoul Breton, but there was no response.
---------------------------------------------------------------------------
- The French version of this article can be found here.
English version by Michael Streeter