As we explained in our article “Is Monaco a tax haven?“, and despite what many believe, Monaco is no longer a tax haven.

Both the European Union and the OECD have removed it from the lists of non-cooperative jurisdictions or tax havens and at the international level it is part of the UN and the OSCE, being a fully approved jurisdiction on the international scene.

Monaco’s corporate income tax, the so-called Impôt sur les Bénéfices has a tax rate similar to the highest rates among European countries. However, under certain circumstances and with appropriate advice, very low taxes or even no taxes can be achieved through Monegasque companies.

Which Companies are taxed in Monaco?

Entities subject to corporate income tax in Monaco are those with significant income from outside the principality, especially when it pertains to intellectual property. The focus is on ensuring that businesses contributing to the local economy benefit from full tax exemptions.

Monegasque companies are subject to corporate income tax if they carry out “commercial or industrial” activities in or from Monaco and if at least 25% of their turnover derives from transactions carried out directly or indirectly outside Monaco.

The Monaco Corporate Income Tax rules provide examples of what is to be considered as a transaction carried out outside the territory of the Principality, meaning a transaction that is used or generated outside Monaco.

Monegasque tax law does not include a general definition of corporate tax residence. In practice, a company is generally considered to be a Monegasque tax resident if it has its registered office in Monaco or its place of effective management in Monaco.

Monegasque Corporate Income Tax rate

Since corporate income tax in Monaco is understood in a broad sense, it can be applied both to companies based in Monaco and to sole proprietors resident in Monaco.

Monaco resident companies and sole proprietors are subject to corporate income tax, taxed at the 25% rate (current CIT rate).

Main characteristics of the Monegasque Corporate Income Tax

Also, in general terms, Monegasque corporate income tax is characterized by the following:

• There are no withholding taxes on dividend distributions or interest payments.
• There is an exemption for dividends received from subsidiaries under certain circumstances.
• There is a limitation on the application of tax losses from previous years (50% of the tax liability or a maximum of 1 million euros).
• There is a limitation on the deduction of financial interest.
• There are relevant Research tax credits for those who promote and encourage innovation.

Temporary exemptions

Even though the Monegasque corporate tax rate is high, there is a temporary exemption from corporate income tax for newly created companies, which is usually very favorable for new residents.

Under certain conditions (mainly, the type of activity carried out and the shareholding structure) the following exemptions are possible:

• Fully exempt from CIT for the first two years (0%).
• Third-year tax rate of 6.25%.
• Fourth-year tax rate of 12.5%.
• Fifth-year tax rate of 18.75%.

How to pay Corporate Income Tax in Monaco?

Taxpayers subject to CIT must file a CIT return with the Monaco tax authorities within 3 months following the end of the financial year, or before April 1st, for the financial year aligned with the civil year.

Tax liability is calculated following a declaration of taxable income and the tax balance must be settled within the aforementioned three months by cheque or bank transfer or in cash.

Along with payment it is mandatory to submit a “Bordereau de règlement de l’impôt sur les bénéfices”.

In addition, taxpayers are required to maintain adequate records for at least:

1. 5 years for entities not subject to CIT in Monaco
2. 10 years for entities subject to CIT in Monaco.

All this procedure will be processed by the Monegasque Tax Authorities.

How to incorporate a company in Monaco?

At Monaco Advisers we have been helping entrepreneurs, high-net-worth individuals, sportsmen and women, and people from the world of cryptocurrencies to incorporate their business in Monaco and prepare their Corporate Income Tax calculation each year.

Our presence and contacts in Monaco make us an ideal travel partner for this arduous task. So if you have questions about Monaco and would like us to help you with the process, please write to us at [email protected].

If you are interested in changing your tax residence to Monaco, we recommend you download for free and read our updated report “The definitive guide to living and paying taxes in Monaco”, available below.