Taxation

The Prince’s Government has launched an overall initiative to facilitate business development in Monaco on all fronts in compliance with rules of ethics, transparency and efficiency

One of the Principality’s key features can be found in the “soft” taxation for natural persons.

V.A.T., corporation tax and capital gains tax on property form the basis of the monegasque tax law.

By modernising the legal system and through a stable and incentivised tax framework, the Prince’s Government is committed to fostering the relocation and development of businesses in Monaco.

Natural persons tax framework

There is no wealth tax, land tax or housing tax in the Principality.

Monegasques and residents of Monaco, apart from French nationals that are governed by the Franco-Monegasque Bilateral Convention of 1963, are not subject to income tax in the Principality.

However, the absence of personal income tax only concerns activities or natural persons actually and genuinely established on Principality territory. This position therefore does not infringe any rule laid down by other countries.

Inheritance tax or tax on donations applies to properties located in the Principality or the one that have there tax base here, regardless the domicile or the nationality of the deceased or the donor (subject to the provisions of the Franco-Monegasque Convention of April, 1st 1950). The level of tax depends on the degree of family relationship between the deceased and their heirs.

• direct descent parents-children or between spouses: 0%
• between brothers and sisters: 8%
• between uncles, aunts, nephews and nieces : 10%
• between collaterals other than brothers, sisters, uncles, aunts, nephews or nieces: 13%
• between non-relatives: 16%

The corporate tax framework.

The only direct tax levied in the Principality is corporation tax on industrial and commercial activities.

The Profits Tax applies to companies carrying out an industrial or commercial activity and generating more than 25% of their turnover outside Monaco, whatever the legal form is. The nature of the activities and location of the operations define the tax liability.

Taxable profits are established after deducting all expenditures, in particular the remuneration of the operator, directors or executives effectively performing duties within the company. The taxation rate is 33.33%, whilst capital gains from transfers of fixed assets may be subjected under certain conditions, exempted of tax if they are reinvested. In addition, this rate should gradually decrease from 2019, to only represent 25% in 2022.

Firms created in the Principality and falling within the scope of corporation tax and that develop real new activities are exempted of taxes for the two first years and benefit from a favorable system for the three following years.

Furthermore, it should be noted that administrative offices are subjected to corporation tax and, usually, taxed at a reduced rate based on a flat rate corresponding to their operating expenses.

Valued Added Tax (V.A.T.) is paid on the same basis and at the same rates than in France; the intra-Community V.A.T. regime has been applicable since January, 1st 1993

French and Monegasque territories, including their territorial waters, form a customs union regulated by the Customs Convention of 18 May 1963, thus the French Customs Code applies to Monaco. Due to its customs union with France, and in order to ensure the strict application of this bilateral agreement, the Principality is incorporated into the European customs territory (although it remains a third State in relation to the European Union). The access to goods and services available on the European single market is therefore ensured for Monaco.

Real Estate tax framework

As previously mentioned, there is no tax on the real estate capital gain, no property taxes or housing tax.

However, there are registration fees (excluding notary fees) which are either proportional or fixed. The fixed fee is generally € 10. The most commonly used rates in real estate are:

• Duty of 1 % for tenancy agreements, calculated on the annual rental plus charges
• Duty of 3 % for mortgage agreement deeds
• Duty of 4.5% on immovable property sales
• Duty of 7.5% on business asset sales
• Duty of 7,5% immovable property sales when they concern persons who don’t meet the criteria of transparency laid down by law.
• Mortgage transcription fees of 1 % on immovable property sales
• Mortgage registration fees of 0,65 % on immovable property sales

There may also be in certain situations VAT at a rate of 20%. This is particularly the case:

• VAT applies automatically on sales of buildable lands and new developments within five years of their completion, and realized by professionals. The tax is due by the seller.
• VAT applies on properties completed more than five years ago when the buy decides to keep this tax system.