The exemption or liability of the lease to value added tax (VAT), which is levied on the same basis and at the same rates as in France, depends on the specific nature of the premises. In fact, in the case of property leasing, a distinction must be made according to whether the premises are furnished or empty, subject to exceptions in the latter case.

I/  In principle, leases relating to premises or assets that are not for residential use are subject to VAT, namely :

• boxes and parking spaces for vehicles not attached to a residential lease (considered as bare premises),
• bare premises for commercial, industrial or administrative use,
• buildings or premises fitted out (with furniture, equipment or facilities necessary for the exercise of the activity) whose rental is considered to be of a commercial/professional nature.

For parking space rentals, the procedure to follow includes registering the activity with the Economic Development Department (Direction de l'Expansion Economique), obtaining a VAT number and registering the lease. However, because of the small rental amount, taxable individuals benefit from the basic exemption from VAT and are thus exempt from this tax provided that the annual rental amount is less than €34,400 in the previous calendar year, or €36,500 in the previous calendar year when the turnover of the penultimate year did not exceed €34,400, as permitted by Article 87, 2° of the Turnover Tax Code. Consequently, if the parking lease, not attached to a residential lease, is not subject to VAT, it will be subject to registration duties in application of law n°580 of 29/07/1953 on the adjustment of registration and mortgage duties, as amended.

In the case of commercial and business leases, the VAT regime depends on the tax regime adopted at the time of the property acquisition by the lessors. Indeed, at the time of the buildings' delivery, the lessors had the option of either paying VAT on the purchase price and opting for a VAT-free regime thereafter, or of not paying VAT at the time of acquisition and paying it later, when collecting the rents.

This system can be doubly interesting for the owner as it allows him on the one hand to save VAT on the purchase price, but also to recover the VAT when collecting the rent which he can deduct from the VAT he would have to pay in the context of works to be carried out within the property. Moreover, for the professional tenant, who is himself subject to VAT on his activity, this will have no real impact apart from his cash flow, since the VAT he will have to pay on the rent will be deductible from the VAT he will have to pay on his turnover.

II/  Rentals of bare premises (with the exception of those described above) which are of a civil nature but for which the lessor may decide, under certain conditions, to charge VAT on the rent he receives are exempt from VAT.

If you would like further information on real estate taxation, we recommend that you contact the Monegasque Tax Services Department.

The whole Valeri Agency team, with its extensive knowledge of business and commercial real estate in the Principality, is at your disposal to offer you premises adapted to your situation.

17 February 2022