Monaco Real Estate - tax and legal regime update
Monaco enjoys over 300 days of sunshine a year but, as well as a benign climate, Monaco offers an attractive tax regime and real estate environment.
Monaco real estate has historically represented an excellent opportunity with long term capital security, and an excellent capital growth. The income and capital gains generated by property are not subject to tax in Monaco (except for property dealers) and, furthermore, no property taxes are levied. Real estate may be owned directly or through a structure, for example, an SCP, being a Monaco property owning company, or through an offshore or onshore entity from another jurisdiction; the route taken will depend on the circumstances of the buyer.
The costs of purchase are relatively low. The registration tax on purchase has been reduced from 7.5% to 4.5% of the purchase price, if the purchase is in an individual’s name or through a transparent entity, plus the notary’s fixed fee.
A purchase through an entity that is considered to be ‘opaque’ will be subject to a registration tax of 7.5% of the property value, though the tax falls to 4.5% on a transfer of shares, assessed on the current market value of the property. In addition, an opaque entity is obliged to appoint a Monaco authorised ‘mandataire’ to file an annual declaration stating whether there has been a change in the beneficial ownership.
Despite these constraints an opaque entity may be an appropriate option for estate planning reasons, as well as a means to preserve confidentiality.
It is necessary to have available property to become tax resident (either as a tenant or as an owner). For individuals wishing to apply for Monaco residence, the procedure is relatively straightforward and quick for EU nationals, slightly longer for applicants from outside the EU.
Once resident in Monaco, individuals are not subject to tax in Monaco on their worldwide income, or to capital gains or wealth tax. There is a modest gift and inheritance tax, but tax free transfer to spouse and children. Estate planning is however necessary because Monaco’s law reserves a significant part of an estate to a defined class of beneficiaries. Income from outside Monaco may also need to be tax optimised, using for example the few interesting double tax treaties signed, which offer tax efficient and compliant options for residents.
There are compelling practical reasons to invest in Monaco real estate, not only because it is a secure and attractive international location.
This article appeared in the Destination Monaco - Special Report section of the forthcoming issue of Abode2. Abode2 is a property magazine focusing exclusively on the finest resort homes and developments across the globe for investment, lifestyle, rental and retirement purposes. See pages 81 to 87 of the magazine at: