UPDATE 1-France's richest man's bid to be Belgian suffers setback

Fri Jan 11, 2013 5:24am EST

(Adds comment from LVMH spokesman)

BRUSSELS Jan 11 (Reuters) - Belgian prosecutors have advised against giving citizenship to Bernard Arnault, France's richest man and chief executive of luxury group LVMH, whom critics accuse of seeking to avoid French taxes.

Arnault had not shown he had principally been living in Belgium for the required period of at least three years, a spokesman for the prosecutors said.

"There is also a preliminary examination of his businesses in Belgium," he added.

An LVMH spokesman in Paris said the prosecutors' decision was no more than "a stage in the process of seeking a double-nationality which won't prejudice its final outcome."

Arnault's bid for Belgian citizenship in September caused uproar in France. Critics believed the move was a bid to avoid a then planned 75 percent supertax on income over 1 million euros and duties on wealth. Arnault has denied this is the reason.

Belgian citizenship is granted by a parliamentary committee, which takes advice from prosecutors, the state security agency and the immigration office. The latter also gave negative advice last month, Belgian media reported.

Arnault has several companies in Belgium, a number of them officially based in a modest apartment building in the Belgian capital, others in a glass office block on chic commercial street Avenue Louise.

LVMH has said its Belgian activities and those of the Arnault group are entirely legitimate and in compliance with the country's tax rules.

Belgian residents, whether or not they are Belgian citizens, do not pay a wealth tax, which in France is now levied on those with assets over 1.3 million euros. Nor do they pay capital gains tax on share sales.

French actor Gerard Depardieu confirmed last month he was leaving France for Belgium to shelter from tax, a moved branded by French Prime Minister Jean-Marc Ayrault as "pathetic". Depardieu has since received a Russian passport.

France has been studying how to amend the supertax on the rich - a key plank in President Francois Hollande's campaign platform last year - after it was thrown out by a top court. A government source said last week it could abandon its reference to a special 75 percent tranche. (Reporting by Philip Blenkinsop; additional reporting by Jean-Michel Belot; Editing by Mark Potter)