Corporate tax in Monaco: current rate and most notable exemptions

As we explained in our article “Is Monaco a tax haven?“, despite what many believe, Monaco is no longer a tax haven.

And yet, Monaco continues to be an extremely attractive country from a tax perspective: individuals do not pay income tax, and there are no taxes on capital gains, dividends, interests, donations or inheritances (in most cases).

However, many people are unaware that there is a tax in Monaco that does exist: the corporate tax. Since 1963, the so-called Impôt sur les Bénéfices (corporate income tax) has applied to companies when certain conditions are met.

In this guide we will explain all you need to know about Monaco’s corporate tax.

NEW REPORT

The report “The definitive guide to living in Monaco” is now available, with detailed information on Monaco’s tax framework, residence and society.

Click here to download it for free.

Who Must Pay Corporate Income Tax in Monaco?

In general, companies and sole proprietors that generate at least 25% of their turnover from outside Monaco are subject to Monaco’s corporate income tax (CIT). The law aims to ensure that businesses contributing significantly to the local economy (i.e., making 75% or more of revenue in Monaco) can enjoy no corporate tax.

Even if you don’t set up a company per se but plan to operate as a sole trader, if your activity is deemed “commercial or industrial” under Monegasque law, you could be subject to CIT.

Instead, certain liberal professions like doctors, lawyers, or accountants, may be considered “civil” (non-commercial), and therefore not subject to CIT. The boundary is not always obvious, so you should contact us if in doubt.

It is also important that for a company to be considered Monegasque, it needs a registered office in Monaco or its place of effective management in Monaco. This means real substance should be in Monaco if you want to claim that your company is legally resident here.

The Corporate Tax Rate in Monaco

Historically, Monaco’s corporate tax rate was 33.33%, aligning more or less with the highest rates in Europe. Over recent years, it has been reduced to 25%. Today, the standard CIT rate in Monaco is 25%, which is close to or in line with the rates applied in many other developed countries.

Aside from corporate income tax, there is no withholding tax on dividend distributions or interest payments. That means you can distribute profits to yourself or your shareholders in Monaco tax-free at the individual level.

Temporary Exemptions for Newly Created Companies

Monaco’s tax system may appear high, but there is a temporary exemption for newly formed companies that can yield 0% CIT for the first two years.

Under certain conditions (mainly the type of activity and shareholding structure), the following schedule applies:

First 2 years: 0% CIT
Third year: 6.25% (25% of 25% of profits)
Fourth year: 12.5% (50% of 25% of profits)
Fifth year: 18.75% (75% of 25% of profits)
Sixth year onward: standard 25% CIT applies

These progressive reductions can make Monaco very attractive for new businesses.

Main Characteristics of Monaco’s CIT

Monaco’s corporate tax framework offers several advantages in addition to the temporary exemptions:

The mentioned absene of withholding taxes on dividends or interest.
Possible exemption for dividends received from subsidiaries.
Tax loss carryforward is limited (either up to 50% of the tax liability or EUR 1 million max).
There is a limitation on the deduction of financial interest.
Generous Research and Development tax credits to promote innovation.

Filing and Payment Process

Companies subject to CIT must file a CIT return within 3 months of their financial year-end (or before April 1 if following the calendar year).

The tax due is settled by cheque, bank transfer, or in cash. Along with the payment, a “Bordereau de règlement de l’impôt sur les bénéfices” must be submitted.

Monaco tax law also requires that companies keep proper accounting records for at least 10 years if they are subject to CIT. Those not subject to CIT must keep records for 5 years.

Avoiding Common Misunderstandings

Some people assume they can avoid corporate tax by operating as a sole trader in Monaco. However, if your activity is commercial and 25% or more of your turnover comes from outside Monaco, you are still subject to CIT, even as a sole trader.

If you are unsure about how your activity is classified (commercial or civil) or where your income is deemed to come from, contact us. Each case must be studied carefully.

NEW REPORT

The report “The definitive guide to living in Monaco” is now available, with detailed information on Monaco’s tax framework, residence and society.

Click here to download it for free.

Incorporating a Company in Monaco

Although incorporation is not the focus of this guide, here is a summary for those interested in forming a company:

You must obtain official authorization to conduct a specific business activity in Monaco. Certain “saturated” or “restricted” fields can be denied.
The most common company form is the SARL (minimum share capital of EUR 15,000, at least two shareholders, and a manager residing in or near Monaco).
The company must have an address in Monaco. This can be the manager’s residence for up to two years (with landlord approval) or a private premise or business center.
After authorization is granted, you open a Monegasque bank account, deposit capital, and register with the Monaco Trade Registry. This process can take several months.

All companies must maintain accounting records and file annual accounts. They must also keep updated information on ultimate beneficiaries.

Owning a Monaco Company While Living Abroad

It is possible to have a Monegasque company while residing elsewhere. But be aware of tax issues in your home country.

If foreign tax authorities deem your company lacks economic substance in Monaco or suspect its effective management is performed abroad, they may claim taxes on its income. Some countries also apply CFC rules (Controlled Foreign Company) that target such setups.

To minimize risks, we recommend:

Maintaining real economic substance in Monaco (office space, employees).
Ensuring effective management is in Monaco (board meetings, local directors).
Having a visible presence (phone lines, websites, actual operations) in the Principality.

Need More Information?

As explained in this guide, even if there is a corporate tax, Monaco offers no personal income tax, no capital gains tax, and no withholding taxes; you can also use salaries to reduce corporate tax; and there are temporary exemptions for newly created companies.

All these make Monaco very attractive for a business project.

If you are thinking of starting a company in Monaco or have questions about its corporate income tax or about the incorporation, please reach out to us at [email protected] or via our contact form.

Also, if you are interested in residing in Monaco, we suggest downloading our updated report, “The Definitive Guide to Living and Paying Taxes in Monaco”, available for free below.

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