Many people assume that Monaco is entirely tax-free. They are often surprised to learn that, although several taxes are absent, some do indeed exist. This misconception typically arises when they learn about taxes that do exist but are little known to non-residents, like the corporate tax.

Another tax that, depending on the circumstances, may be collected in the Principality is the inheritance tax.

In this article we will demystify Monaco’s inheritance tax framework, examine how it applies to assets both within and outside the Principality, and discuss whether a preventive change of residence could be a prudent step to safeguard your legacy.

Inheritance tax in Monaco

Monaco is widely known for its attractive tax environment, especially the absence of personal income tax for residents (with the exception of French nationals). However, contrary to popular belief, inheritance tax does exist in Monaco.

The key point to understand is that Monaco imposes inheritance tax only on assets located within its territory. This means that regardless of the domicile, residence, or nationality of the deceased or the beneficiary, the tax is applied solely to assets situated in Monaco.

The tax rates depend on the relationship between the deceased and the beneficiary. The structure is designed to favor close family ties. For example, a spouse or direct descendant is exempt from inheritance tax on assets in Monaco. Other beneficiaries face the following rates:

• Spouse and direct beneficiary: 0%
• Partners under civil union: 4%
• Siblings: 8%
• Uncles, aunts, nephews, nieces: 10%
• Other relatives: 13%
• Unrelated beneficiaries: 16%

This tiered system means that while close family members enjoy significant tax relief, more distant relatives or non-related individuals may be subject to higher rates. It is important to note that these rates apply strictly to assets physically located within Monaco.

Particular cases

It is important to clarify that if the inheritance includes real estate that is not located in Monaco, a Monegasque resident who for example inherits a property in Nice from his father, who is also a Monegasque resident, will have to face French inheritance tax laws. This will depend entirely on the country in which the property is located.

As a general rule, this does not happen if the inheritance consists of money or financial assets abroad: a Monegasque person will not have to pay taxes in Belgium if he inherits funds that his father had in a Belgian bank account.

In that case, the inheritance would be subject only to Monegasque taxation, just as if it were an inheritance with a Monegasque real estate property (ie: a house within the Principality of Monaco).

Therefore, in the ideal case, both the testator and the heir are residents of Monaco, and the inheritance consists of money or financial assets (generally located in any country) or real estate assets in Monaco.

Planning a transfer of wealth

As a consequence of what was explained in the previous section,, there are circumstances where a preventive change of residence could be considered to minimize future tax bills.

For example, if you are a Monaco resident with considerable assets in the Principality and you plan to pass on your legacy to beneficiaries who are not based in Monaco, it might be wise to for them to consider a preventive relocation of the beneficiary.

It is also worth remembering that the Principality also has a very favourable tax system for donations, which means that there would be no need to wait for the fateful moment to occur.

How to get the residency

Before you can benefit from Monaco’s favorable tax environment, including its unique inheritance tax rules, you must first obtain residency. The process to secure Monaco residency is thorough and designed to ensure that only those who meet stringent criteria can take advantage of the Principality’s benefits.

The main requirements include:

• Securing a property in Monaco by purchasing or renting a suitable flat or house for your family
• Demonstrating financial capacity through sufficient savings or income, typically verified by a local Monegasque bank
• Providing a valid criminal record check covering the previous five years from your country of origin or your last country of residence

Once your application is submitted, you will undergo a detailed due diligence process conducted by the local authorities.

This process can take several weeks. If successful, you will be issued the “Carte de Séjour” (residence permit). For more detailed information on residency requirements, please refer to our monaco tax residency requirements guide.

Get in touch today

If you are planning to transfer assets and want to ensure that your legacy is preserved in the most tax-efficient manner, our team at MonacoAdvisers is here to help. We specialize in guiding high-net-worth individuals through the complexities of Monaco’s tax system and residency requirements.

Whether you have questions about inheritance tax specifics or need personalized advice on estate planning, we are ready to assist you. Please contact us via email at [email protected] or through our contact form.

Let us help you safeguard your legacy and take full advantage of what Monaco has to offer.

Sources:

• https://monservicepublic.gouv.mc/en/themes/tax/information/general-information/tax-in-monaco
• https://en.service-public-particuliers.gouv.mc/Residency/Settling-in-Monaco/How-to-obtain-a-residence-permit/Conditions-for-issuing-residence-permits
• https://en.gouv.mc/Government-Institutions/The-Government/Ministry-of-Foreign-Affairs-and-Cooperation