Monaco: Domestic Corporate Taxation
Scope of Corporate Tax
This page was last updated on 27 February 2021.
In Monaco, profit tax (impôt sur les bénéfices) is levied on three types of entity:
- An entity receiving royalties or other income which relates to intellectual property rights such as the licensing and selling of copyrights, patents and trademarks. If however some tax has been deducted at source in another jurisdiction, the Monégasque authorities will give a tax credit against the amount assessed.
- An entity involved in commercial or industrial activities, 25% or more of whose income is from sources based outside Monaco.
- A company incorporated in Monaco which holds 20% or more of the shares of a non-resident company will pay profit tax on dividends received from the non-resident company (note that pure holding companies are not allowed in Monaco).
Hence profit tax is not levied on:
- Entities that are not involved in intellectual property or in commercial and industrial activities (e.g. professional firms, consultancies, service providers)
- Entities that are involved in industrial and commercial activities 75% or more of whose income comes from within Monaco
- Non-resident entities in any line of business, residence being determined by the residence of the directors, officers and main shareholders and the location of board meetings.
Since no income tax is payable by individuals in Monaco (except by certain classes of French nationals), a business entity can avoid profit tax by paying out all profits in salaries or management fees, hence ensuring negligible business profits for taxation purposes (subject to statutory limits on directors' fees).
Note that an administrative head office of a foreign corporation is not subject to business profit taxation since it does not have a commercial purpose. Instead the administrative head office pays a charge of 2.66% of the sum of expenses relating to the running of the office.
The profits of a branch of a foreign company are deemed to be earned outside Monaco, so the branch may be required to pay profit tax.