Monaco

In Monaco, employers have various tax and social security obligations, primarily focusing on social security contributions and specific corporate taxes.

Employer Social Security Contributions

Employers in Monaco contribute to several social security funds covering sickness, family allowances, pensions, and unemployment. The combined employer contribution rate is approximately 28.65% of the employee's gross salary.

• Sickness and Family Contribution: 15.05% of the employee's gross salary.
• Basic State Pension: 8.03% of the employee's gross salary.
• Unemployment Contribution: 4.05% of the employee's gross salary.
• Supplementary Pension (CMRC): Rates and ceilings vary based on two earning tranches, with the employer covering 60% of the contribution. Tranche A is up to €3,947, and Tranche B covers earnings between Tranche A and eight times the Tranche A ceiling. Specific rates within these tranches further differentiate between contributions that accrue pension rights and those that don't.

Corporate Income Tax (CIT)

The standard CIT rate in Monaco is 25%. However, companies generating more than 25% of their turnover outside Monaco are subject to this tax. Companies whose revenue is exclusively generated within Monaco are exempt. New companies benefit from reduced CIT rates for the first five years of operation.

• Years 1-2: 0%
• Year 3: 6.25%
• Year 4: 12.5%
• Year 5: 18.75%

CIT is paid in four installments throughout the year (February, May, August, and November), each amounting to 20% of the previous year's CIT liability. The remaining balance is due upon filing the annual CIT return, within three months of the financial year's end or by April 1st if aligned with the calendar year.

Other Taxes and Duties

• Business License Tax: All businesses operating in Monaco are subject to a business license tax. The amount varies based on the nature and size of the business.
• Value Added Tax (VAT): The standard VAT rate is 20%, aligning with the rate in neighboring France.
• Registration Fees and Stamp Taxes: These apply to various transactions, including property transfers and legal documents.
• Excise Duties: These are levied on specific goods such as alcohol and tobacco.
• Leasehold Tax: A 1% tax on the rent of housing paid by the tenant, not the landlord.

Employee Social Security Contributions and Income Tax

Employees also contribute to social security, generally totaling between 10% and 14% of their gross salary depending on salary and funds.

• Basic State Pension: 6.55% of gross salary.
• Unemployment: 2.4% of gross salary.

Monaco residents, excluding French nationals, are not subject to personal income tax. French nationals remain subject to French income tax on their Monaco-sourced income due to a bilateral tax treaty.

Work Permits and Visas

Foreign workers require both a long-stay visa and a work permit. After securing these, a residence permit is necessary for living in Monaco.

This information is current as of February 5, 2025, and might be subject to change. It is crucial to consult with a tax advisor for personalized guidance.

In Monaco, no personal income tax is levied on residents, except for French citizens who remain subject to French income tax. However, employers pay social security contributions based on employee salaries.

Employer Contributions

• Social Security Contributions: Employers contribute a significant percentage of each employee's gross salary towards social security. This covers areas such as pensions, sick leave, and family benefits. The combined employer contribution rate for these programs is around 25%-35% of the employee's gross salary, and is split into several separate payments.
• Caisse de Compensation des Services Sociaux (CCSS): 14.45%
• Caisse Autonome des Retraites (CAR): 9.05%
• Unemployment Insurance: 4.05%

Employee Deductions

• Social Security Contributions: Employees also contribute to the social security system through deductions from their gross pay.

• Caisse Autonome des Retraites (CAR): 6.85%

• Unemployment Insurance: 2.40%

• No Income Tax: Monaco residents, other than French citizens, are exempt from personal income tax on all forms of income. This encompasses salaries, investment income, capital gains, and director's fees.

• French Citizens: Due to a tax treaty between France and Monaco from 1963, French citizens residing in Monaco are still subject to French income tax rules and regulations, regardless of where their income is sourced.

• No Capital Gains Tax: Residents of Monaco typically do not face capital gains tax on profits from the sale of assets.

• No Wealth Tax: Monaco does not impose a tax on an individual's net worth or accumulated wealth.

General Tax Information

Monaco's tax system is considered highly advantageous, particularly for high-net-worth individuals. The absence of personal income tax, capital gains tax, and wealth tax makes it a desirable location for residency. While the employer social security contributions are substantial, the overall tax burden remains relatively low compared to many other European countries. The lack of withholding taxes on dividends, interest, and royalties further enhances Monaco's tax appeal. It is always advisable to consult with a tax advisor to ensure compliance with the latest regulations and optimize tax planning strategies.

Value Added Tax (VAT) in Monaco is closely aligned with the French VAT system due to a customs union. However, Monaco maintains its own specific regulations and thresholds.

VAT Rates

• Standard Rate: 20% (Applies to most goods and services)
• Reduced Rates:
  • 10% (Certain foodstuffs, non-alcoholic beverages, hotels, pharmaceutical products, transport)
  • 5.5% (Foodstuffs, non-alcoholic beverages, books, energy)
  • 2.1% (Pharmaceutical products, newspapers)
• Zero Rate: 0% (Exports and certain international services)
• Exemptions: Financial services, public services (postal, medical, welfare, education, broadcasting), real estate, gambling.

VAT Registration Thresholds (Effective January 1, 2025)

• Goods: EUR 85,000
• Services (excluding accommodation): EUR 37,500
• Accommodation Services: EUR 85,000
• Authors and Performing Artists: EUR 50,000

Businesses exceeding these thresholds in the previous year are required to register for VAT. Registration is also mandatory in the current year if turnover surpasses the threshold by 10% or more. For instance, a business dealing in goods must register if its turnover reaches EUR 93,500 (EUR 85,000 + 10%). Similarly, businesses providing services (excluding accommodation services) must register if the turnover exceeds EUR 41,250 during the current year.

VAT Filing and Payment

• Frequency: Monthly (or quarterly if VAT payable is under EUR 4,000 annually).
• Deadlines: Vary depending on the type of declaration and business location (EU or non-EU).

Penalties

• Late Filing: Initial fine of EUR 15, rising to EUR 150 if not addressed within 30 days.
• Late Payment: Interest on arrears at 0.20% per month of the outstanding amount, calculated from the first day of the month following the due date.

Special Considerations for Non-Residents

Non-resident businesses providing digital services to consumers in Monaco are required to register for VAT and collect the 20% VAT.

Place of Supply Rules for Virtual Events

For virtual cultural and entertainment events provided to non-taxable persons outside Monaco, the place of supply is considered to be outside Monaco's jurisdiction.

VAT Deduction for Electric Vehicles

Businesses can deduct VAT on electricity used to power electric land vehicles used exclusively for VAT-deductible operations. This also applies to rented electric vehicles where the rental VAT is not deductible.

Tax Representatives

Foreign companies conducting VAT-liable activities in Monaco generally need to appoint a tax representative registered with the Monaco Tax Department. This representative handles VAT reporting and compliance on behalf of the foreign business. The rules for appointing a tax representative not residing in France or Monaco have been eased.

It is crucial to stay up-to-date with the latest VAT regulations and consult with a tax professional for specific guidance. The information provided here reflects the status as of February 5, 2025, and might be subject to change.

Monaco offers a highly attractive tax environment, particularly for individuals. While corporate tax incentives exist, the main draw is the absence of personal income tax for most residents.

Personal Tax Incentives

Monaco's advantageous personal tax system includes:

• No Personal Income Tax: Residents, excluding French nationals, are not subject to tax on their worldwide income. This encompasses salaries, investment income, capital gains, and director fees.
• No Wealth Tax: Monaco does not impose taxes on an individual's accumulated wealth or assets.
• No Local Taxes: Residents are exempt from local property or municipal taxes.
• No Withholding Tax: There are no withholding taxes on income from investments or employment.
• Favorable Inheritance Tax: Inheritance tax rates are generally low, especially for transfers between spouses and direct descendants where assets are located within Monaco.

Eligibility for Tax Benefits: To benefit from these tax advantages, individuals must obtain a tax residency certificate. This requires:

• A valid residence permit ("carte de séjour").
• Meeting either the physical presence test (183+ days per year in Monaco) or demonstrating that Monaco is their center of economic interest.
• Proof of Monaco residency (property ownership or rental agreement, utility bills).

Corporate Tax Incentives

While personal tax incentives are Monaco's main draw, certain corporate tax benefits also exist:

• Exemption for Non-Commercial Activities: Companies engaged in non-commercial activities (e.g., strategic consulting, R&D) are entirely exempt from corporate income tax (CIT).
• Limited CIT Applicability: CIT applies only to companies engaging in commercial or industrial activities and generating over 25% of their turnover outside Monaco. The standard CIT rate is 25%.
• Incentives for New Businesses: Eligible new businesses may benefit from a progressive five-year CIT exemption. This includes full exemption for the first two years, followed by a progressively increasing CIT application (25% in the third year, 50% in the fourth, and 75% in the fifth).
• "Headquarter" Tax Regime: Qualifying headquarters carrying out management, coordination, or control functions solely for their group benefit from a reduced effective CIT rate of approximately 2%, calculated based on operating costs.
• R&D Tax Credits: Qualifying R&D companies can utilize R&D tax credits to offset their CIT liability.
• No Withholding Tax on Dividends, Interest, and Royalties: There are no withholding taxes on cross-border payments of dividends, interest, or royalties.

Tax Transparency: It's important to note that Monaco adheres to international tax transparency standards and participates in information exchange agreements.

French Nationals: French nationals residing in Monaco remain subject to French income tax laws, even if they meet Monaco's tax residency criteria.

Important Note: Tax laws and regulations are complex and subject to change. This information is for general guidance only and is current as of February 5, 2025. It is essential to consult with a qualified tax advisor for personalized advice tailored to your specific circumstances.