Tax Residency of France in Monaco: Guide for French Citizens

Moving to Monaco attracts many candidates every year who are seduced by the absence of income tax for residents. However, French citizens do not benefit from the same tax advantages as other nationalities in the Principality: under the 1963 Franco-Monegasque tax treaty, France taxes its nationals domiciled in Monaco on all their worldwide income. as if they were still residing in France. This tax particularity, often overlooked, is essential to understand before putting down your suitcases on the Rock. To prepare your project and find out all the conditions for living in Monaco, it is essential to find out about the steps to become a Monegasque resident. Depending on your situation, especially if you are applying from outside the European Union, specific procedures apply.

Once settled, it will be necessary to renew your residence permit to maintain your status, and it may be relevant to compare tax residency options between Spain and Monaco or between Germany and Monaco, depending on your profile and wealth objectives. It is also essential to make a clear distinction between residence and Monegasque nationality, because obtaining a residence permit does not give access to nationality or the benefits associated with it.

For a professional project, Monaco's economic dynamism attracts many candidates wishing to work in Monaco, and knowing the average salary in Monaco will help you assess the necessary standard of living. Finally, it is crucial to plan the minimum required to settle in Monaco, especially in terms of financial resources, in order to build a solid residency file. This guide will help you understand in detail the taxation applicable to French nationals in Monaco, the advantages that remain despite the tax constraints, and the reasons why choosing the Principality can remain an attractive option, even for a French citizen.

1963 Tax Convention and Income Tax

In 1962, faced with the influx of French people seeking to avoid taxes by settling in Monaco, France reacted firmly (going so far as to establish a customs blockade). This crisis ended with the agreements of 18 May 1963, which profoundly changed the tax regime for French people in Monaco. The Principality had to agree to include Monaco in the territorial scope of French income tax, resulting in real tax "discrimination" against French people living in Monaco.

In concrete terms, any French citizen who transfers his or her residence to Monaco is considered by France to be a French tax resident, with rare exceptions. Article 7-1 of the Franco-Monegasque tax treaty stipulates that persons of French nationality domiciled in Monaco (from 13 October 1957) are subject to income tax in France as if they were resident in France, on all their income. In other words, a French person living in Monaco will pay income tax to the French tax authorities in the same way as a taxpayer living in France, and he does not benefit from Monaco's zero tax rate on income.

Why this specificity? France's historical objective was to fight against tax evasion by its nationals to Monaco. The 1963 treaty thus created an unprecedented case of tax domicile based on nationality: the simple fact of being a French resident in Monaco is sufficient to be considered as a tax resident in France, even if one does not actually live there. This regime derogates from the usual rules of tax treaties (which are based on effective residence) and aims not to avoid double taxation, but to avoid "double absence of taxation" – in this case to prevent a French person from being taxed either in France or in Monaco.

Exceptions : However, the 1963 Convention provided for special cases of French nationals who were exempt from this rule. The following "privileged French nationals" are excluded from the scope of Article 7-1:

• French people who had been long-term residents before 1963 : Those who could prove that they had been habitually resident in Monaco for five years on 13 October 1962 (i.e. settled before 13 October 1957) escaped the new measure. They retain a tax status similar to that of non-French nationals (taxable in France only on any income from French sources).

• French people born in Monaco and who have always lived there : Initially, even Monegasque natives of French nationality were affected by taxation in France. However, a 2014 decision of the Council of State excluded from the scheme French people who are "children of the country" (born in the Principality and have never transferred their tax residence to France). These people can obtain a certificate of Monegasque domicile recognised by the French tax authorities, making them considered as full Monegasque tax residents (and therefore not taxable in France on their income outside France).

In summary, apart from these very specific profiles, any French citizen residing in Monaco is taxed on income by France. This explains why French people cannot, by moving to Monaco, take advantage of the absence of income tax enjoyed by other foreign residents of the Principality.

What tax advantages remain for French people in Monaco?

Even if the main advantage (income tax exemption) is not applicable to French nationals, Monegasque residency still offers some tax advantages for them – directly or indirectly:

• No local taxes or direct taxation in Monaco: The Principality does not levy any property tax or housing tax on properties, and does not apply any local tax to individuals. A French person who owns his or her home in Monaco will therefore not pay local taxes (whereas in France, even if he or she is a non-resident, he or she would have a property tax on a property, for example). In addition, Monaco does not apply withholding taxes on salaries or investments, nor does it apply a wealth tax – which creates a very light local tax environment. Although these tax absences do not prevent France from taxing the income of the French resident, living in Monaco allows you to avoid any additional local taxation.

• Relief on wealth tax/IFI in certain cases: Monaco does not have a wealth tax. Until the end of the 1980s, French people in Monaco also escaped the wealth tax (ISF) in France, benefiting from a total exemption from wealth tax on their assets located outside France. Since a 2002 amendment to the treaty, this privilege has been abolished: French nationals established in Monaco from 1 January 1989 are now subject to the ISF (now the real estate wealth tax, IFI) in France on all their assets. as if they were residing in France. 

• Reduced social security contributions: French social security contributions (CSG, CRDS) do not apply in the same way to French nationals living in Monaco. Indeed, although they are subject to French income tax, they are not affiliated to the French social security system, which exempts them from social security contributions on most of their capital income. 

• Advantageous inheritance regime: The tax treaty of 1 April 1950 between France and Monaco, which is still in force, offers very favourable provisions for inheritance tax for Monegasque residents. This convention aims to avoid double taxation of inheritance and has established the following principle: immovable property is taxed in the State in which it is located, while movable property (securities, debts, shares, etc.) is taxed in the State of residence of the deceased. In concrete terms, if a French national has resided in Monaco for at least 5 years on the day of his death, his movable assets (bank accounts, securities portfolios, company shares) will be subject to Monegasque inheritance tax exclusively. However, Monaco applies extremely low rates: 0% in the direct line (between parents and children or between spouses), 8% between brothers and sisters, and rates of only 10% to 16% for more distant or unrelated heirs. By way of comparison, in France, inheritances in the direct line above a certain allowance can be taxed up to 45%.

In summary, if a French person does not earn anything in income tax by moving to Monaco, he can still benefit from other facets of Monegasque taxation : no local taxes, a reduced tax burden on capital (no local wealth tax, an IFI that can be partially circumvented, no CSG on investments), and a very lenient inheritance tax for the benefit of his family. These advantages, combined with the general attractiveness of Monaco, explain why it remains interesting, in some cases, for a French taxpayer to settle there.

Why live in Monaco despite the absence of an income tax exemption?

Given that a French person in Monaco continues to pay income tax in France, one might think that the interest in settling there is limited. However, many other factors make the Principality attractive to a French citizen, beyond the optimisation of income tax:

• Quality of life and safety : Monaco offers an exceptional living environment, with a mild Mediterranean climate, a very clean urban environment and top-of-the-range infrastructure. Above all, the Principality is renowned for being one of the safest places in the world. The ratio of police officers per capita is one of the highest, video surveillance covers the entire territory 24 hours a day, and the result is an extremely low crime rate. This level of security, unique in Europe, brings great peace of mind to residents. For a French family, knowing that their children can move around the city safely or that violent crime is almost non-existent is an intangible but valuable advantage.

• Absence of other taxes and charges : As mentioned above, living in Monaco means no local taxation (neither housing tax nor property tax) on housing, no car tax (no vignette or annual penalty on vehicles registered in the Principality), nor social contributions on capital income. Many micro-loads existing in France do not exist in the Principality. For example, Monaco does not impose a TV licence fee, and employee social security contributions are generally lower than in France for the same net salary (the Monegasque social system being distinct).  

• International framework and economic dynamism : Monaco, although tiny, is a center of international business and finance. Living there allows you to rub shoulders with a cosmopolitan network of entrepreneurs, sports and entertainment personalities, and great fortunes from all over the world. This network can open up professional or investment opportunities that would not be found elsewhere, while remaining a stone's throw from France. The Principality is very dynamic economically (high GDP per capita, almost full employment, strong presence of banks and multinationals) and organises many prestigious events (Formula 1 Grand Prix, Monaco Yacht Show, charity galas, etc.). A French citizen living in Monaco benefits from this effervescence while maintaining cultural and linguistic (French is the official language) and geographical proximity to France.

• Administrative advantages and quality of services : Becoming a Monegasque resident is often accompanied by administrative simplification in certain areas. The bureaucracy in Monaco is renowned for being efficient and the administration accessible (given the small size of the country). The quality of public and private services is high: excellent health and education systems, subsidized cultural events, first-class sports infrastructure, etc. For a French business leader or wealthy individual, Monaco's political and fiscal stability is also an asset: the tax framework is stable (few or no abrupt tax changes, unlike in France where tax legislation changes frequently). This predictable environment allows for better long-term planning.

In short, living in Monaco for a French person is not just a simple tax equation on income tax. It is a lifestyle choice, combining security, prestige, an international environment, and a reduced tax on wealth. Of course, the cost of living and real estate is very high, and the lack of income tax savings means that the net financial benefit of such a move must be reassessed. It is therefore a decision to be weighed in a balanced way: many French people choose Monaco less to reduce their income tax (which they will continue to pay), than for all the qualitative and patrimonial advantages offered by the Principality.

Tax residency: criteria according to French and Monegasque law

The concept of tax residence is of particular importance in the Franco-Monegasque context. The French and Monegasque tax authorities do not have the same definition, nor the same criteria, to establish a person's tax residence – and these differences partly explain the special regime for French people in Monaco.

From France's point of view: Under French domestic law, an individual's tax residence is determined by the criteria of Article 4 B of the General Tax Code (CGI). According to this article, any person who meets one of the following criteria is a tax resident in France:

• have their home (family home) or main place of residence in France;

• carry out their main professional activity in France (salaried or not), unless it is on an ancillary basis;

• have the centre of its economic interests in France (investments, main sources of income, business headquarters, etc.).

In addition, state employees posted abroad remain tax domiciled in France.

Normally, a French citizen who leaves France to settle in Monaco and who lives there more than 183 days a year, works there and no longer has economic ties in France should no longer be a French tax resident according to these criteria. However, the 1963 tax treaty takes precedence over domestic law: it introduces a special rule for French citizens living in Monaco, stipulating that they are considered domiciled in France "under the same conditions as if they were domiciled in France". In other words, France ignores the factual situation (effective residence in Monaco) and treats the taxpayer as if he were still in France. This unique mechanism means that the notion of tax residence on the French side, in the case of Monaco, is essentially dictated by nationality (for Monaco alone).

From Monaco's point of view: Monaco, on the other hand, does not have a formal legal definition of "tax residence" as there is no personal income tax in the Principality. It is therefore more commonly referred to as administrative residence or habitual residence in Monaco. In order for a foreigner (including a French national) to be considered a Monegasque resident in the eyes of the Monegasque authorities and to obtain a residence permit, he or she must, in particular:

• Live at least 183 days per year in Monaco (half of the year + 1 day), which is the usual criterion for the main stay.

• Have an effective domicile in Monaco (accommodation in their name, either as an owner or tenant, or accommodation made available) as material proof of their establishment.

• Carry out the centre of their professional or personal activities there : if they work, their main professional activity must be located in the Principality; if he is retired or annuitant, he must spend most of his free time there, etc.

Can a Frenchman live in Monaco?

Moving to Monaco as a French citizen is a project that must be carefully thought out, with knowledge of the tax particularities. If you hoped to avoid income tax, the Franco-Monegasque agreement of 1963 dampens this hope: unless you are a "privileged Frenchman" (a rare case), the French tax authorities will tax you as if you had stayed in France. However, Monaco has not usurped its reputation as an advantageous tax centre – including for the French – thanks to the absence of many taxes (wealth, inheritance, premises) and an overall pro-taxpayer environment. Beyond the numbers, the Principality offers an exceptional quality of life, unrivalled security and prestige that, for many, are priceless.

In the end, residing in Monaco for a French person is a trade-off between patrimonial tax considerations and a lifestyle choice. This guide has highlighted that, despite the lack of income tax savings, optimisation levers exist (inheritance, wealth tax/IFI, financial investments without CSG, etc.) and can justify, with the qualitative advantages, an expatriation to the Principality. As each personal situation is unique, it is strongly recommended to seek enlightened tax advice in order to maximise the benefits of a Monegasque residence while respecting the legislation in force on both sides of the border. Monaco remains a privileged land of welcome for many French people, provided they understand the tax and legal rules of the game – and now you know them.

⚖️ Legal disclaimer:
This article is provided for informational purposes only and does not constitute an incentive, recommendation or promotion of tax evasion. The information presented is only intended to explain the legal and tax rules applicable to French citizens wishing to settle in Monaco, in accordance with the legislation in force and international tax treaties. The author accepts no liability for any use that may be made of this information. It is the responsibility of each reader to consult a tax lawyer or a legal professional before any decision or procedure with tax or patrimonial consequences.