MONACO Law and Practice Contributed by: Donald Manasse, Donald Manasse Law Offices
1. Tax 1.1 Tax Regimes
be considered invalid, which then incurs notarial fees. There are, however, exceptions. 1.2 Exemptions There are no exemptions. 1.3 Income Tax Planning Because of the favourable tax regime in Monaco, the opportunities for tax planning may be limited. 1.4 Pre-Immigration and Exit Planning Because of the favourable tax regime in Monaco, the pre-immigration or exit planning opportunities are lim - ited. 1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens Real estate transactions are subject to registration taxes, which are based on a percentage of the value of the property, and are customarily paid by the pur - chaser. Notarial fees of 1.5% will also apply. The registration taxes are 4.75% if the property is purchased by an individual (regardless of nationality or residence) or by a Monaco civil (non-trading) com - pany held by individuals (regardless of nationality or residence). The registration taxes are 7.5% in all other cases of indirect ownership. The cost of purchasing a “new build” directly from the promoter is subject to value-added tax, currently at 20%, which is normally incorporated in the price. In addition, there will be the 1.5% notarial fee and a 1% registry fee. No taxes are applied during the period of ownership, and there are no capital gains taxes on resale. The owner is required to contribute to the building com - mon charges but that is a contractual obligation and not a tax. 1.6 Stability of Tax Laws Monaco eliminated income taxes in 1869. The prin - cipality has no national debt. The convention con - cerning tax with France was enacted in 1962 and has withstood the test of time.
The Principality of Monaco imposes no income taxes on individuals, regardless of nationality. There are no capital gains taxes, property taxes or school taxes. The principality raises revenue through: • value-added tax (known as TVA) on most goods and services, the general rate of which is 20%; • registration taxes on various types of transactions; and • to a limited extent, gifts and estate taxes. Gift and estate taxes are only applied to Monaco situs assets, at a rate that depends on the degree of rela - tionship between donor and donee, as follows: • 0% between spouses, ascendants and descend - ants (parents and children); • 4% on persons having entered into civil unions; • 8% between siblings; • 10% between aunts/uncles and nieces/nephews; Transfers to trusts are taxed in the same manner, depending on the relationship between the settlor and the beneficiaries. However, the 0% rate may not be applicable where the settlor, the trustees or a protec - tor have discretion to modify the beneficiaries. The trust tax treatment does not apply to foundations or other types of fiduciary relationships. It is specific to trusts. Trust revenue is otherwise not subject to tax. There is a different tax treatment for trusts created under Monaco Law 214 of 1936, which will be subject to a tax of up to 1.7% on all assets transferred to the trust (and notarial fees of 1.5%), regardless of whether or not the assets are based in Monaco. It is possible to reduce that one-time tax to an annual 0.20% tax on the assets held by the trust, in the trust document. Generation-skipping transfer taxes are unknown. One unique feature of Monaco gift law is that gifts must be made by notarial act; otherwise, they may • 13% between other relatives; and • 16% between unrelated parties.
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