This article appears in the next edition of Monaco Business Magazine, an international business magazine for entrepreneurs in the Principality of Monaco. For more information on the magazine see http://www.monacobusinessmagazine.com/
Low cost restructuring for Monaco property: last chance before 30 June 2014!
Living in Monaco permanently or for holidays is a dream that some of you may have realised though the purchase of a property.
Whilst the tax environment is pretty safe and simple to deal with, some tax rules still have to be respected.
Holding property in Monaco is very often done through structures like companies and/or trust. The choice of the ownership is usually done at time of the acquisition based on various criterions such as the value of the property, the residency of the purchaser, his family situation, confidentiality and estate wishes.
In the past a lot of transactions have been done through sale of shares instead of sale of the property. It means that a lot of properties in Monaco are owned by very old offshore structures, which were transferred through the years.
Recent tax changes in Monaco could lead to the necessity to review current ownership structures. It is also a good opportunity to adapt them to new family or personal situation. A short window of few weeks allows you to change the ownership at a low tax cost.
I Monaco (“MC”) Law n°1.381 reminder
MC Law n°1.381 dated 29 June 2011 introduced new specific rules regarding ownership and beneficial ownership of Monaco property.
Since 1 July 2011any non-transparent legal entity as considered by article 2, which holds real rights (such as full ownership rights, a life interest, bare ownership, right to use the property) of Monaco property, is obliged:
• To appoint a fiscal representative duly authorized by the Monaco Tax Office (“Mandataire Agréé”);
• To file an annual return declaring a change or the absence of change of any of the effective beneficial owner “EBO” (“bénéficiaire économique effectif”) of the legal entity.
The non-transparent legal entities are mainly companies, foundations, trusts, life insurance contracts, the capital of which includes real interests in MC property, except the following three types of Monegasque companies, which are deemed to be transparent for MC Law 1.381 purposes:
• MC “Société Civile Particulière/SCP” or “Société Civile Immobilière/SCI”, if the shareholders are exclusively natural persons acting on their behalf, when the identity of such shareholders is known from the Monaco Tax Office.
• MC SCP or SCI, which shareholders are the above mentioned MC SCP or SCI.
• Listed companies as authorized by the MC Authorities.
The EBO is/are the natural person(s) who ultimately, partly or entirely, own or control, or benefit from the profits or part of the profits of a legal entity, including subscribers to and beneficiaries of any life insurance policy the capital of which includes real rights in MC property.
Non-transparent legal entities are obliged to appoint the Mandataire Agréé when purchasing a Monaco property or reals rights on it. Should an entity fail to comply with this designative obligation it is liable to pay a proportional registration duty of 1.5% calculated on the value of the real rights held on the MC property plus a late interest penalty of 0.8% per month.
Any non-transparent legal entity is obliged to file an annual declaration by 30 September, certifying a change or the absence of change of EBO during the tax year end (which starts on 1 July of previous year and closes on June 30 of the current year). Should an entity fail to comply with the above declarative obligation it is liable to pay a proportional registration duty of 4.5% of the full market value of the MC property plus a late interest penalty of 0.8% per month.
When there is a change of one or more of the EBO, a 4.5% proportional registration duty is due on the entire market value of the Monaco property.
However, the 4.5% proportional registration duty is not applicable despite of a change of EEB:
• On a gift to or on inheritance between spouses, ascendants or descendants in direct line;
• On the sale of shares of a Monaco Non-Trading Company/Société Civile (taxed under distinct registration duties which will vary depending on whether the purchaser is an individual or a transparent entity or a non-transparent entity);
• On the sale of specific shares of Monaco Joint Stock Company (Société Anonyme).
II MC Law n°1.381 temporary low cost restructuring
When the dissolution of a non-transparent legal entity results in the transfer of the property to the EBO (which is a natural person) the applicable registration duty is 1% until 30 June 2014 but 4.5% or 7.5% (depending on the transferee) starting from 1 July 2014.
Rosemont Consulting is able to advise and assist on restructuring as well as to provide Mandataire Agréé services.
We can also assist in dealing with the constitution and administration of property holding structures such as SCIs.
For further information on Rosemont Consulting SARL and services provided please visit www.rosemont.mc
Please do not hesitate to contact Cecile Acolas at c.acolas@rosemont.mc for queries on these topics.