Monaco is often heralded as a tax haven, albeit mistakenly, due to its low or, in some instances, nonexistent taxes. There is a frequent influx of inquiries regarding Monaco’s tax regime, accompanied by numerous misconceptions.

In this context, the taxes one may encounter in Monaco are as follows.

Individual Taxes in Monaco

Main article: Monaco income tax

Monaco is famously known for not imposing personal income tax on its residents. This policy has been in place since 1869 and applies to all residents except French nationals, who are subject to the terms of a bilateral treaty with France.

In summary, unless they are French nationals, resident individuals are not subject to personal income tax in the Principality of Monaco. Thus, an individual resident in Monaco will not pay taxes on any income, capital gains, or passive income..

However, this does not mean that someone cannot become a tax resident in Monaco and take advantage of not paying taxes.

If someone wants to become a tax resident in Monaco, an individual must request a tax certificate. This certificate can be obtained by any person meeting the relevant conditions, particularly those who reside in Monaco for more than 183 days per year. Even fewer days may suffice if an individual can prove strong economic ties to the country and that Monaco is their main residence.

There is no wealth tax, annual property tax, or council tax in Monaco.

Inheritance Tax and Gift Tax

However, despite the principality’s reputation as a country with no taxes, it does enforce specific taxation policies, particularly concerning inheritance and gift taxes. These taxes are levied on all assets situated within Monaco, underscoring the fact that, contrary to popular belief, tax obligations do exist for residents and property holders in this prestigious enclave.

Inheritance tax applies only to assets located in Monaco, regardless of the domicile, residence, or nationality of the deceased. Under Monégasque law, succession is governed by the law of the state in which the deceased was domiciled at the time of death.

The inheritance tax rates depend on the relationship between the deceased and the heirs:

•  Spouse and direct beneficiary: 0%
• Partners under civil union: 4%
• Sibling: 8%
•  Uncle, aunt, nephew, niece: 10%
• Other relative: 13%
• Unrelated beneficiaries: 16%

In this regard, tax on lifetime gifts applies only to assets situated in Monaco, regardless of the domicile, residence, or nationality of the donor.

As per gifts in Monaco, gifts must be registered (evidenced by a notarized deed) and are subject to gift tax at the inheritance tax rates. When assets located in Monaco are gifted (through a will or otherwise) to certain charitable institutions or to the Principality, there is a tax exemption.

Corporate Tax

Main article: Monaco corporate tax rate

Again, despite what many people think, there are corporate taxes in Monaco. Companies in Monaco are subject to corporate income tax only if they perform industrial or commercial activities and generate more than 25% of their revenue from outside the principality.

The standard corporate income tax rate is 25%, but new companies enjoy significant exemptions: they are fully exempt for the first two years, followed by gradually increasing rates up to the fifth year.

There are no withholding taxes on dividends or interest payments from Monaco-based companies, and there are exemptions available for dividends received from subsidiaries under certain conditions.

Value Added Tax (VAT) and Transfer Tax

Main article: Monaco property tax

In Monaco, luxury shopping, including at stores like Hermès, is subject to VAT similar to France, due to its EU customs status. Thus, Monaco applies VAT at the same rate as France (20%), covering most goods and services, with specific exceptions and reductions for certain categories.

In Monegasque real estate market, VAT mirrors the French system and applies at the standard rate of 20% on property transactions. This includes the sale of building plots, new constructions, or significantly renovated properties. If the actual market value of a property is higher than the sale price, VAT is calculated on the market value.

For older properties that don’t qualify as “new buildings” and land that isn’t classified as building plots, VAT does not apply. Instead, transfer duties are levied on these transactions. The rate of transfer duty is 4.5% of the market value if the buyer is a private individual or a qualifying Monegasque Personal Civil Company (SCP), and 6.5% for other types of buyers. Notary fees are also added to the total cost of these transactions.

Other Taxes and Duties

Monaco levies registration fees, stamp taxes, and taxes on alcohol and tobacco. Businesses must also pay a business license tax and employers contribute to social security, which funds healthcare and pensions.

Despite being known as a tax haven due to its low-tax policies, Monaco has implemented several measures to ensure financial transparency and combat tax evasion, including entering into international agreements for the exchange of tax information, fulfilling almost all the OECD requirements and the international tax standards.

How to take the first step?

At MonacoAdvisers we have been helping entrepreneurs, high-net-worth individuals, sportsmen and women, and people from the world of cryptocurrencies to transfer their tax residency to Monaco for years.

Our presence and contacts in Monaco make us an ideal travel partner for this arduous task. So if you have questions about Monaco and would like us to help you with the process, please write to us at [email protected].

If you are interested in changing your tax residence and are not quite sure which is your ideal destination, we recommend you download for free and read our updated report “The definitive guide to living and paying taxes in Monaco”, available below.