There is no offshore activity as such in
Monaco. It is a low-tax jurisdiction
for individuals (see Personal Taxation) and certain
types of business activity are exempt
from tax (see Direct Corporate Taxation).
Generally, taxation is determined
by the activities carried on by an
entity and not by its corporate form.
Trusts can be formed in Monaco but only by
local residents; the question of taxation
therefore doesn't arise. See below
for the fee basis.
Monaco Corporate Fees
Trusts and certain types of tax-exempt corporate
entity pay fees to the Principality
as follows:
Trusts: One-time registration fees are payable
on formation of a trust, at the rate
of 1.3%,1.5% or 1.7% of the value
of the settled property depending
on whether the trust has 1, 2, or
3 or more beneficiaries. The fee drops
to between 0.25% and 0.45% where the
property settled is Monaco real estate.
Alternatively the trustees can elect
to pay an annual tax of 0.2% of the
value of the settled property. Lower
tax rates may apply in relation to
trust assets which consist of shares
in Monegasque companies. An asset
placed in a trust on which registration
tax has been paid is not subject to
inheritance or gift tax (see Personal Taxation).
Entities outside the Commercial Code, ie
Branches of foreign companies, Administrative
offices ('bureaux administratifs'),
and Agencies ('Agences') pay a version
of the Business Income Tax by applying
the standard rate of 35% to a fraction
of their expenses, usually 8%, although
it can be up to 30%. 35% of 8% gives
a tax rate of 2.8% of expenses.
Monaco Taxation of Foreign
Employees of Offshore Operations
This section refers to the taxation of foreign
employees of the various types of offshore
entity; see Domestic Personal Taxes for the
general principles of individual taxation
in Monaco, which also apply to the resident
employees of non-resident entities.
There is in fact no distinction between the
employees of resident or non-resident
operations. There are in any event no
individual taxes on employment or other
income in Monaco; however, social security
contributions are payable by the employer
in all circumstances, and these amount
to 40% for the employer, 10% for the
employee.
In 2004, Monaco was forced to join the EU's
Savings Tax Directive regime, and agreed
to impose a withholding tax on the interest
income of EU residents at the same rate
as Austria, Belgium and Luxembourg (initially
15%) and to hand over 75 per cent of
such revenues to the Member State of
the EU resident concerned. Monaco also
agreed to exchange information on request
in criminal or civil cases of tax fraud
or similar misbehaviour. The new regime
came into effect from 1st July 2005,
and it remains to be seen what kind
of impact it will have on Monaco's banking
sector.
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Monaco Exchange Control
There are no exchange controls in Monaco,
which has a monetary union with France,
a part of the EU.
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Monaco Offshore Activities
In Monaco, business activities which escape
tax are those that service the local
market to at least 75% of their turnover,
in a reversal of the usual situation
in offshore centres whereby it is external
activities which escape tax. See Direct Corporate Taxation
and Offshore Business Sectors.
Pure holding companies are not permitted
in Monaco, although a trading company
can hold shares in its trading subsidiaries.
Trusts are for Monaco residents only, who
don't pay tax; there are no particular
restrictions on their holdings. Foundations
are not limited to Monaco residents,
and are also flexible in terms of their
holdings; but they are cumbersome -
see Types Of Company.
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Monaco Employment and
Residence
Any non-French national wishing to take up
employment in Monaco must obtain a work
permit from the authorities. To obtain
a work permit the foreign national must
submit a visa application, a contract
of employment and evidence of a fixed
address in Monaco. There are no quotas
on the hiring of foreign nationals and
work permits are not hard to obtain
but Government policy is for priority
to be given to residents and nationals
of Monaco.
Any
person wishing to reside in Monaco for
more than 3 months must apply for a
residence permit. The rules for the
grant of a residence permit were agreed
with France in 1998 and distinguish
between European Union nationals and
others.
The
procedure is for the applicant to present
himself at the local police station
for interview with documents in hand
proving identity and with a letter from
a bank verifying sufficient assets or
income to support himself and any dependants
during the duration of his stay. A residence
permit will not be granted where it
is shown that the applicant has a conviction
for a serious criminal offence.
A
residence permit is usually issued within
45 days from the application and initially
is valid for 1 year and must be renewed
annually for the next 2 years. Thereafter
the resident permit is granted for 3
year periods and after having had a
residence permit for 9 years an applicant
is entitled to one which is valid for
a period of 10 years. A 10 year residence
permit entitles the applicant to apply
for citizenship. Alternatively any person
whose father is a national of Monaco
can acquire Monegasque nationality as
of right.
There
are no restrictions on foreigners or
locals purchasing real estate in Monaco
(except, obviously, your overdraft limit).
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