In most countries tax regulations are becoming more stringent. We can mention the anti-avoidance legislation, measures fighting tax evasion and money laundering, "treaty shopping" provisions, FATCA disclosing obligations, the new OECD BEPS program and, last but not least the expected entry into force of the multilateral Convention on the automatic exchange of information.
In this context, the Principality of Monaco wants to comply with international standards but at the same time to keep its attractiveness to foreign investors mainly due to a particularly advantageous personal tax system. In maintaining this balance Monaco preserves its place as a privileged location in the heart of Europe.
Its determination to combat tax evasion and tax fraud is illustrated by concrete actions: the signature of 49 bilateral agreements relating to the exchange of tax information and also the implementation of global standard anti-money laundering legislation.
Monaco is one of the few countries that allow its residents to benefit from an advantageous tax system, political stability and a favourable economic environment within a legal framework that meets high international standards.
In order to benefit from this attractive environment it is necessary to become resident.
The future resident must simply have sufficient resources and accommodation in Monaco. The procedure can take up to eight weeks. Non-EU nationals must first obtain a long-stay visa at the French consulate.
To be tax efficient, the Monegasque tax resident should also ensure that he is not resident in another state. Becoming tax resident in Monaco does not prevent other countries treating you as resident. All residents of Monaco should take care to analyse the residency rules of each country where they could be resident.
Although Monaco has low taxes for its residents, it is still recommended that each Monegasque resident performs a review of their worldwide tax and estate situation.
Indeed, any income received outside of Monaco should be structured to optimize the distribution of such income to the Monaco resident. Monaco has only signed a few tax treaties to avoid double taxation. Some countries also still consider Monaco as a country with a privileged tax regime. This may result in the unfavourable taxation of income and assets located out of Monaco.
From an inheritance point of view, the change of residence often leads to a change of the applicable law to the succession.
Draft law n°912 which plans to introduce greater flexibility in the choice of the applicable succession law will be a useful legal instrument to plan the succession of Monaco residents.
A change of residency could also have effect on the law applicable to a marriage, to a divorce and the law governing the protection of minors; all this should be considered to organise and protect family wealth.
A Monegasque tax residence, if correctly planned, can be an efficient international tax planning option and a useful tool for the development of a business. Rosemont Consulting provides qualified and multilingual expertise to international clients in these areas.
For more information, please contact Nicolas Trucco, Tax Manager at n.trucco@rosemont.mc
Article originaly Published in Citinavi - Spring 1st Quarter 2019