Monaco: Offshore Business Sectors
This page was last updated on 18 May 2020.
Private banking for rich Monégasque residents was the original basis of the principality's banking sector, though this changed in the early 2000s. Many factors have contributed to Monaco's rise as a banking centre, including the presence of a secure legislative base (the Bank of France oversees its regulation), the absence of withholding tax on interest payments, and a rush of Italians away from their domestic tax regime.
At the time of writing there are some 79 banks and financial institutions in Monaco, with more than 300,000 accounts (there are 7,600 Monégasque nationals, and another 28,000 foreign residents). Approximately 85% of the banks' customers are non-resident. Banking turnover is in excess of €2bn, and assets under management top €78bn.
Although the majority of banking is still for private individuals, commercial banking has grown substantially, particularly in real-estate lending and in shipping.
Much of the legal basis of banking in Monaco stems from French banking law, supplemented by provisions of Monaco criminal and company law. Banking secrecy is imposed by clause 57 of the French law, while defence against money-laundering are contained in Monégasque laws no. 1157 of 23/12/92 and 1162 of 7/7/93. Secrecy is adequate for individuals with no French connections, but somewhat compromised for French residents (see Double Tax Treaties).
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%, rising to 20% from 1 July 2008 and 35% from 1 July 2011) and to hand over 75% 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 force from 1 July 2005.
In 2009, Monaco agreed to increase its transparency with foreign tax authorities in the hope that the OECD would remove it from its list of uncooperative jurisdictions. In its statement Monaco said that it would follow ‘recent evolutions in the area of bank secrecy and information exchange’ undertaken by jurisdictions such as Switzerland, Luxembourg and Austria and conform to standards laid down by the OECD (see Double Tax Treaties). Indeed, Monaco, along with Andorra and Liechtenstein, was removed from the OECD list of uncooperative jurisdictions in May 2009. Since then, Monaco has signed 20 tax information exchange agreements.