Taxation in Monaco: An Overview
Publié par Paolo Petrini
In a world where tax pressure often shapes life and investment choices, Monaco stands out as a valuable exception. This sovereign territory, nestled between the sea and the mountains, has been able to establish a unique tax framework that is both advantageous, stable and internationally recognized. Far from preconceived ideas, the Principality offers a structured system, in line with transparency standards, while preserving a rare attractiveness for individuals and companies.
For more than a century, the absence of income tax for resident individuals has been one of the foundations of this model. This singularity does not mean a complete absence of taxation, but rather a thoughtful balance between incentives and targeted contributions. To better understand the entire system, our page dedicated to taxation in Monaco explores the pillars of the Monegasque tax system.
Faced with this specificity, many foreign residents are considering a long-term settlement in the Principality. In order to meet the needs of everyone, our agency has set up resources adapted to different nationalities. For example, Germany's tax residency in Monaco allows German nationals to accurately understand the implications of a change in status.
This guide offers you a detailed analysis of the tax mechanisms in force in Monaco: personal taxation, corporate taxation, central role of VAT, inheritance tax, indirect taxes and international compliance. To go further in the preparation of your installation project, we invite you to also consult our complete file for moving to Monaco, which brings together the essential information at each stage.
Finally, to benefit from tailor-made support in the realization of your project, whether it is a real estate purchase, a change of tax residence or a professional establishment, you can call on our real estate agency in Monaco, recognised for its expertise, discretion and in-depth knowledge of the Monegasque market. To better understand what makes the Monegasque tax model unique, this article offers a complete overview, ranging from the founding principles to the current rules applicable to individuals and companies, including the specificities of real estate, inheritance tax and the Principality's international commitments.
The Basic Principles of the Monegasque Tax System
The foundations of Monaco's tax system are based on the absence of direct taxes for individuals and limited taxation for companies. Since 1869, Monaco has not applied any personal income tax. This historic step, taken during the reign of Prince Charles III, helped attract residents from all over the world. At the same time, Monaco does not have a wealth tax, nor local taxes such as property tax or housing tax. These tax absences are an integral part of Monaco's strategy to stand out from neighbouring countries and create an attractive climate for investors and wealthy individuals.
However, this does not mean that Monaco is entirely tax-free. The only direct tax in the Principality concerns companies: it is the income tax (ISB) applicable to industrial and commercial activities exceeding a certain threshold of activity outside Monaco. In addition, Monaco collects indirect taxes, first and foremost the Value Added Tax (VAT) aligned with the French regime. Monegasque VAT, introduced by the customs union with France, amounts to 20% on most goods and services. This VAT is now the main source of revenue for the Monegasque state, representing more than 50% of the budget in 2023.
Finally, there are specific duties and taxes that complete the tax landscape: registration duties on certain transactions, inheritance and gift taxes on property located in Monaco, taxes on the consumption of certain products (alcoholic beverages, tobacco, insurance, etc.). The whole forms a coherent but very advantageous tax framework, the result of historical developments and agreements with neighbouring countries.
Personal Taxes in Monaco
For individuals residing in Monaco, the general rule is total exemption from income tax. A Monegasque (non-French) resident does not pay any tax on his personal income, whether it is salaries, dividends, interest or capital gains. Monaco also does not tax the capital or wealth of individuals (no wealth tax), which creates a fertile ground for the preservation and growth of private wealth.
There are, however, exceptions related to nationality of origin. Under the Franco-Monegasque tax treaty of 18 May 1963, French nationals residing in Monaco remain subject to French income tax. In other words, a French citizen domiciled in the Principality must declare and pay his taxes in France, as if he were still living there. This atypical treaty was concluded to prevent French people from benefiting from total non-taxation by moving to Monaco, and it does not aim to eliminate double taxation (since Monaco does not tax income), but to prevent non-taxation. It should be noted that a clause exempted the very few French people who settled in Monaco before 1962, but this hardly concerns anyone today.
In addition, U.S. citizens living in Monaco are, under U.S. law, subject to U.S. worldwide income tax (the IRS taxes its citizens wherever they reside). Thus, an American will benefit from the absence of Monegasque local tax, but will still have to pay his taxes in the USA. For nationals of other countries (Europeans, etc.), there is no special agreement: if they establish their tax residence in Monaco, they will take full advantage of the Monegasque exemption on their income, while having to comply with any tax obligations of their country of origin (for example, declarations of change of residence, exit tax, etc., depending on the jurisdiction).
Becoming a Monegasque tax resident also requires meeting certain conditions. Monaco does not issue an automatic certificate of tax residence without criteria. You must actually reside in Monaco for at least 183 days a year (six months) or at least have your main centre of life there. Proof of residence (such as a certificate of tax residence) can be obtained by providing proof of an address in Monaco and strong economic or personal ties with the Principality. These precautions are intended to ensure that only genuine residents receive the tax benefits. Moreover, since 2016, Monaco has participated in the automatic exchange of financial information (CRS standard) with many countries, enhancing transparency and allowing other States to monitor the situation of their taxpayers residing in the Principality.
Corporate Taxation in Monaco
Contrary to popular belief, Monaco does tax certain companies. Companies that generate more than 25% of their turnover outside the Principality are subject to a 25% income tax, while companies with local activities are exempt. This system, in place since 1963, only concerns industrial and commercial structures, excluding civil or purely local activities. The 25% rate applies only to the share of profits derived from international activity. Profits generated in Monaco remain untaxed. To encourage the establishment of new companies, new companies benefit from a total exemption for two years, then a progressive allowance until the fifth year.
Monaco does not levy any withholding tax on dividends or interest paid to non-residents, which can be tax-advantageous depending on the rules of the country of origin. Few bilateral agreements exist, except with France, with which Monaco applies a similar base.
Finally, local companies do not incur business tax or specific turnover tax, excluding VAT.
VAT in Monaco
Despite its status as a third country vis-à-vis the European Union, Monaco applies VAT (Value Added Tax) like any other EU country, by virtue of the customs union concluded with France. Since 1963, the Principality has been integrated into the French customs territory and therefore subject to the intra-community VAT regime (in force since 1 January 1993). In concrete terms, the same VAT rates and rules as in France apply in Monaco. The standard rate is 20% on most goods and services, with the same possible reduced rates (for example for certain basic necessities, cultural activities, etc., although these cases are rarer in the Monegasque economy).
VAT is an indirect tax that is central to the Monegasque tax model. As mentioned above, it is the first source of revenue for the State. Each purchase of goods or services in Monaco includes VAT, most often included in the prices displayed, and its proceeds are paid to the Monegasque Treasury and then shared according to the agreements with France. This mechanism allows Monaco to operate without income tax: current consumption and tourism contribute largely to the State's coffers via VAT, just like in France.
In real estate matters, VAT also applies to transactions comparable to the sale of new property. For example, the sale of new constructions, building land or recent buildings (less than 5 years after completion) is subject to VAT at the rate of 20%, just like in France. The seller (developer or individual taxpayer) must pay it to the Monegasque tax authorities. If a new property is sold below its actual market value, the administration may also use the market value to calculate the VAT due.
Inheritance Tax and Other Taxes in Monaco
Although Monaco is known for its low taxes, inheritance and gift taxes do exist. They are certainly not as high as in many countries, but they apply to property located in Monaco, regardless of the domicile or nationality of the deceased or the donor. Monegasque law provides for variable rates depending on the family relationship between the deceased (or the donor) and the beneficiary. Transfers in the direct line (between parents and children) and to the surviving spouse are 100% exempt, i.e. 0% rate. Partners united by a Monegasque civil union contract benefit from a reduced rate of 4%. Secondly, the rates increase for collateral relatives and non-relatives: 8% for brothers and sisters, 10% for nephews, nieces, uncles and aunts, 13% for other distant family members, and 16% for unrelated beneficiaries. These rates apply only to the share of assets located in Monaco. For example, if a Monegasque resident owns property in France, it will be subject to French inheritance tax where applicable, while his assets in Monaco will be subject to Monegasque law. It should be noted that gifts made during lifetime follow the same scale as inheritances, and must be registered by a notary in Monaco. There are exemptions if the beneficiary is a Monegasque charitable entity or the Principality itself (bequests to the State, etc.), in order to encourage philanthropy.
In addition to inheritances, Monaco collects other various taxes and duties that complement its tax system. These include:
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Registration fees : these are taxes levied on the registration of certain legal acts (transfer of business, creation of a company, etc.) or contracts. Depending on the case, the fee is fixed (e.g. €10) or proportional. The usual proportional rates in Monaco range from about 0.5% to 7.5% depending on the nature of the act. We have already mentioned the duties of 4.5% to 6.5% on real estate transactions, which are a major example of this.
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Stamp duties : these are small fixed taxes affixed to certain official documents (judicial acts, certificates, etc.). The amounts are generally modest but contribute to the financing of the Administration.
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Sectoral taxes : Monaco applies specific taxes on certain products and services, often in alignment with France. For example, duties on alcohol and beverages (excise duty) and the tax on precious metals are in force in Monaco under the same conditions as in France. Similarly, a tax on insurance agreements applies to insurance premiums (as in France). These indirect taxes, invisible to most residents, ensure a contribution to the budget without burdening individuals' incomes.
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Rent tax (lease tax): when a property is rented in Monaco, the tenant must pay a tax equivalent to 1% of the annual rent + charges at the time of registration of the lease. This lease registration fee, paid once at signing, goes to the State.
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License and professional fees : businesses and companies pay an annual business license fee (usually a few hundred euros) to have the right to operate. In addition, the registration of a new company, the issuance of a business card, etc., entail fixed fees.
All these duties and taxes, although secondary to the large taxes, show that Monaco is not a totally tax-free area. The Principality has set up a range of targeted contributions that allow it to meet its needs (infrastructure, public services, security, etc.) while maintaining exceptional tax attractiveness.
Monaco: a tax haven?
The question often comes up as to whether Monaco is a "tax haven". Historically, the Principality has had this reputation due to the absence of direct taxes for residents and its banking secrecy of yesteryear. Today, Monaco has largely improved its image in terms of international cooperation. From a purely tax point of view, it would be more accurate to speak of a jurisdiction with preferential taxation rather than a tax haven in the opaque sense of the term. Indeed, Monaco has signed and implemented numerous information exchange agreements with foreign administrations, and has adhered to OECD transparency standards. For example, it adopted the Common Reporting Standard (CRS) in 2016, allowing the automatic exchange of financial data with more than 100 countries. Thanks to these efforts, neither the OECD nor the European Union considers Monaco to be a non-cooperative tax haven.
This means that while tax rates in Monaco remain extremely low, the Principality no longer offers the legal opacity associated with tax havens. Monegasque residents must comply with the law: it is not a question of tax evasion, but of legal optimisation in a stable and recognised jurisdiction. Moreover, neighbouring countries are closely monitoring the reality of the presence of their former taxpayers in Monaco. The French, Italian, British authorities, etc., check that people who declare themselves Monegasque residents actually live and operate there, in order to avoid fraud (such as pretending to reside in Monaco while spending most of their time in their country of origin). Monaco is working together in this direction by, for example, providing France with an annual statement of French-source income paid to residents of Monaco, to facilitate the application of the tax treaty with France.
Key Points to Remember
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Absence of income tax : Monaco does not tax the income of individuals who have been resident for more than a century, except for French citizens who remain taxable in France. No taxation on assets either (no ISF/IFI), nor housing or property tax.
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Targeted corporate taxation : no corporate tax for purely Monegasque activities, but a 25% ISB applies to companies with more than 25% of their turnover abroad. New businesses benefit from gradual exemptions during their first 5 years.
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VAT and indirect taxes : Monaco collects VAT at the same rate of 20% as in France, which is the main resource of the State. EU-aligned customs and excise duties also apply (alcohol, tobacco, petroleum products, etc.).
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Moderate inheritance tax : no inheritance tax between close relatives (0% in direct line and between spouses); beyond that, rates of 4% to 16% depending on the degree of kinship apply to property located in the Principality. Donations follow the same scale.
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Other local taxes : 1% tax on the registration of rental leases (payable by the tenant), registration fees of 4.5% to 7.5% on real estate transactions and certain deeds, notary fees (~1.5%) on sales, stamp duty on official documents, and specific taxes aligned with France (insurance, Real estate VAT, etc.) are part of the tax landscape.
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International compliance : Monaco is no longer considered a non-cooperative tax haven. The Principality has adopted transparency standards (automatic exchange of information, anti-fraud cooperation), while maintaining a very light domestic tax regime. This reinforces the reliability and legitimacy of the Monegasque regime in the eyes of investors and foreign states.
With this overview, it is clear that Monaco's tax system is a subtle balance between maximum attractiveness for taxpayers and measured fiscal sovereignty. Monaco has created an ecosystem where residents and businesses thrive without the usual tax burden, but where everyone contributes indirectly to the community through consumption and other targeted levies. This unique model explains Monaco's enduring appeal to real estate investors, entrepreneurs and all those looking for a stable, advantageous and recognised tax framework.
FAQ on Taxation in Monaco
Does Monaco levy income tax on residents?
No. The Principality of Monaco does not apply any income tax for its residents, except for French citizens, who remain subject to tax in France according to the bilateral tax agreements of 1963.
Is there a wealth tax or local taxes in Monaco?
No. There is no wealth tax (ISF/IFI type), property tax, or housing tax in Monaco. Property owners do not pay annual tax on their assets.
How are companies taxed in Monaco?
Companies with more than 25% of their turnover outside Monaco are subject to a profit tax at a rate of 25%. Those operating exclusively in the Principality do not pay this tax.
What is the VAT rate in Monaco?
The standard VAT rate in Monaco is 20%, identical to that applied in France. It concerns goods, services and new real estate sales.
Is Monaco considered a tax haven?
No. Although Monaco offers advantageous taxation, the Principality complies with international standards of transparency and automatic exchange of information, which distinguishes it from non-cooperative jurisdictions.
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