The Principality of Monaco is known for its attractive tax system, both for residents and companies.
The main characteristic of the Monegasque tax system is the absence of direct taxation for residents and companies making most of their turnover in Monaco.
Scope of Corporate Income Tax :
Corporate Income Tax (hereinafter “CIT”) was instituted in the Principality by Ordinance n°3.152 of March 19, 1964.
The following are subject to this tax:
The legal form of the company is neutral with regard to the CIT. Only the nature of the activity and the location of the transactions determine the subjection to the CIT.
Determination of taxable profit :
The taxable profit is determined on the basis of the overall result of transactions of all kinds carried out by the undertakings, less all charges.
The deduction of the remuneration of the owner or managers shall, however, be subject to the effectiveness of their work and the non-excessive nature of their remuneration.
Tax rate :
The CIT rate is 25% for fiscal years beginning on or after January 1, 2022.
Tax aid :
Companies created in the Principality that fall within the scope of the CIT and develop a genuinely new activity are exempt for a period of two years and benefit from a preferential regime for the following three years.
Value added tax (hereinafter “VAT“) is an indirect tax on consumption
Territorial scope of VAT :
The Franco-Monegasque Customs Convention of 18 May 1963 established a customs union between France, Monaco and the territorial waters separating these two territories. Thus, although the Principality is a State outside the European Union, it is part of the European customs territory in order to ensure the application of the bilateral agreement of 18 May 1963.
Material scope of VAT :
As in France, in Monaco, supplies of goods and services effected for consideration by a taxable person acting as such, independently, are subject to VAT.
Similarly, transactions outside the material scope of VAT, but expressly designated by law, are subject to VAT on Monegasque territory (self-supply of goods, imports, etc.).
Transactions normally exempt from VAT may become taxable at the option of the person carrying them out (transactions of banking and financial institutions, rental of bare buildings for industrial, commercial or professional use, etc.).
Finally, transactions contributing to the production and delivery of buildings are also taxable in Monaco.
VAT rates :
VAT is levied on the same basis and at the same rates as on French territory (standard rate of 20% and reduced rates of 10%, 5.5% or 2.10%).
Stamp duty is a tax that a taxpayer must pay for certain formalities, including papers for civil and judicial acts and documents that can be filed in court and relied upon.
Stamp duties are either fixed or according to the size of the paper used.
Registration fees are levied, on the occasion of the formality of registration, on transfers or civil or judicial acts.
The following are subject to registration, with mandatory deadlines:
On the other hand, certain acts are exempt from registration fees, in particular (non-exhaustive list):
Registration fees are either subject to a fixed fee of €10 or at a proportional rate of between 0.5% and 7.5%.
Monegasque residents are not liable for income tax in Monaco.
French nationals :
Under certain conditions, pursuant to Article 7-1 of the Franco-Monegasque bilateral convention of 18 May 1963, French nationals domiciled in Monaco are subject to income tax in France, in respect of all their income, under the same conditions as if they had their domicile or residence in France.
However, the following remain outside the scope of Article 7-1 of the Tax Convention, and are therefore considered to have their tax domicile outside France:
Consequently, the above-mentioned persons must prove their situation by producing a certificate of residence issued by the Monegasque authorities or, when they are unable to produce such a certificate, by any other means of proof.
The dissolution of the marriage puts an end to this derogation, unless it is caused by the death of the spouse.
French nationals who also hold a foreign nationality, other than Monegasque :
Under the joint Franco-Monegasque advisory commissions of 6 and 7 July 1978, 12 July 1991 and 27 May 1993, it was accepted that persons with dual French and foreign nationality, other than Monegasque, may be considered to be domiciled for tax purposes outside France if:
Monegasque nationals :
Monegasque nationals domiciled in the Principality are domiciled in that State for tax purposes.
It should be noted that those holding both French and Monegasque nationality are considered to hold Monegasque nationality only.
Inheritance or gift tax applies only to assets located in the territory of the Principality or with situs there, regardless of the domicile, residence or nationality of the deceased or the donor.
The level of taxation depends on the degree of kinship between the deceased (or donor) and the heir (or donee):
Monaco’s tax regime for inheritance and gifts is thus advantageous because it does not provide for any settlement of inheritance or gift tax in a direct line, i.e. between ascendants, descendants or spouses.
Prior to Bill No. 1049, adopted by the National Council on 27 July 2022 and published in the Journal de Monaco on 12 August 2022, the use of a trust under foreign law as a transmission tool prevented the application of this tax regime. Indeed, the concept of “direct line” was interpreted strictly by the Monegasque legislature.
From now on, the exemption from transfer duties free of charge applies to transfers inter vivos or upon death that take place within the framework of a trust under foreign law, subject to compliance with two conditions: