The three most common associations that immediately come to mind about Monaco are “tax haven”, “luxury” and “Prince Albert II”. However, interestingly, for the people of Monaco, Monaco is much more. It’s about safety, quality of life and a highly supportive community of international renown.
It is very frustrating to read frequently in the press and various media that Monaco is a tax haven when it is not. Unfortunately, people judge Monaco very unfairly. You could say that they judge a book by its cover. Rarely will any person devote the time and energy to getting to know this little Duchy, what it is and what it offers.
Monaco is not a tax haven
There are many countries around the world that offer tax breaks or are tax havens. Meanwhile, Monaco is not even tax free. The only advantage it has is zero personal income tax, no capital gains tax and no real estate tax. There is only one condition – you must obtain the status of a tax resident of the Principality of Monaco. You can find more about it here: https://mchercberg.com/zycie-w-monako-jak-zostac-rezydentem-monako/
All foreign nationals officially residing in Monaco and citizens of Monaco nationality can benefit from the zero income tax system for individuals. There is only one exception – French citizens who live in Monaco have to pay personal income tax, which is calculated in accordance with the rules of French tax law and the 1963 France-Monaco bilateral convention. However, the lack of personal income tax applies only to activities and persons actually residing in the territory of the Principality.
The inheritance or gift tax is applied to immovable property and assets situated in the territory of the Principality or with a tax base there, irrespective of the domicile or nationality of the deceased or donor (subject to the Franco-Monaco Convention of April 1, 1950). This does not apply, for example, to funds deposited in a foreign bank account. If the property is located in Monaco, in practice this only means a small percentage of the inheritance tax in the event of the death of the owner. However, it should be emphasized that in this case we are dealing with an exemption from the above-mentioned fee. tax for direct line heirs (parents, spouses and children).
There is an agreement between the EU and Monaco on the automatic exchange of information. Under this agreement, the Union and Monaco began to automatically exchange information on bank accounts at the beginning of 2018. The information that will be exchanged will include not only the income of EU citizens, but also such issues as: interest and dividends, as well as balances and proceeds from the sale of financial assets. This agreement is in line with global standards established by the OECD. You can find more about it here: https://mchercberg.com/2020/04/22/na-czym-polega-automatyczna-wymiana-informacji-crs-w-monako/
Companies that engage in industrial or commercial activities and generate more than 25% of their turnover outside Monaco, whatever their legal form, are subject to corporate income tax (Impôt sur les Bénéfices – I.S.B.). Companies earning more than 75% of their income in the Principality of Monaco are therefore not subject to the tax on business profits.
Taxable profits are determined after deducting all expenses, in particular the remuneration of the sole entrepreneur, management board or directors actually performing duties in the company.
The tax rate is 28% (26.5% as of January 1, 2021 and 25% as of January 1, 2022), while capital gains from the transfer of fixed assets may, under certain conditions, benefit from an exemption if they are reinvested.
Companies established in the Principality and subject to corporate income tax that develop into a clearly new business are exempt from this tax for the first two years and benefit from the favorable system for the next three years. You can find more about it here: https://mchercberg.com/biznes-w-monako-podatki-korporacyjne-w-monako/
Competition for tax breaks is fierce, but Monaco offers luxury prosperity, clearly reflecting the fact that there have never been so many applications for residency before. It is not taxes that are the reason why the Principality attracts millionaires, and more.: https://mchercberg.com/2020/06/29/dlaczego-monako-jest-mekka-najbogatszych-ludzi-swiata/
Monaco as a vibrant place
The Principality of Monaco is a unique place where you can color your life if you are fed up with the usual black and white. It is a land just below the rainbow of the Mediterranean coast, where people usually come to make their dreams come true, even if only for a day. However, if you allow yourself this dream then Monaco has much more to offer.
Monaco offers a combination of unique advantages in a very integrated way, which makes the Principality a unique place in Europe. The area of the Principality of Monaco is 1.98 km2. Yes, it is smaller than the average district in Warsaw. Even if it is a tiny gem with a small location, it offers extremely high security, a favorable fiscal system, political and economic stability and exceptional weather conditions throughout the year. You can find more about it here: https://mchercberg.com/2020/09/22/populacja-i-dlugosc-zycia-liczba-milionerow-w-monako-statystyki/
In the eyes of the world, the Principality of Monaco has always represented elegance and luxury dating back hundreds of years. Monaco also has an important international presence as it participates in many international events. After moving to Monaco, you will notice that there is a new and exciting event almost every week, so you can always find something that suits your tastes. In the intervals between events, one can also observe the tremendous efforts that Monaco is making under its various international commitments.
Monaco and its position in the international arena
What makes Monaco exciting is the benefits it offers to its people, even if the Principality is heavily influenced by relations with France.
Monaco and France have always acted side by side throughout history, and often France has provided protection for the population of this small country. This Franco-Monegasque relationship was built on strategic pillars. Due to its location between the borders of Italy and France, Monaco has always played an important strategic role.
We must stress that the Principality of Monaco is not a French county or French territory. There are many differences between the two cultures, even if they share common social origins and economic aspects. Monaco’s small population has always been isolated by the sea and the surrounding mountains. Monaco’s natural borders provided excellent isolation and protection against external influences.
Since 1993, the Principality of Monaco has been a member of the United Nations, which has also helped it develop and build mutually beneficial ties with key international organizations.
Monaco is also part of the European Monetary Area, known as the euro area. However, Monaco is not a member of the European Union. The European Union respects the identity and principles of the Principality and enables harmonious economic development to the benefit of both sides. It is therefore an important fact that the Principality of Monaco never agreed to the transfer of sovereignty to the European Union. You can find more about it here: https://mchercberg.com/o-monako-monako-a-unia-europejska/
This independent environment and a vibrant multicultural community have attracted many foreigners from hundreds of countries. Effectively, Monaco has not jeopardized its uniqueness, in particular its special right of establishment and the preference accorded to its citizens.
Monaco as the pearl of the Cote d’Azur
Monaco is an exclusive and unique place with many benefits for investors. Stability, security, neutrality, tailored taxes, unique location, high-quality business environment, international environment, extensive workforce, high-quality banking center, etc.
In September 2020, Prince Albert unveiled a roadmap for Monaco’s recovery from the COVID-19 crisis – which includes a focus on supporting businesses and attracting new investors from Europe and beyond. One of the main goals is to put digitization at the center of new initiatives in the Principality that aim to modernize and introduce the latest technologies. Monaco has already seized the initiative, being the first European country to equip itself with its own sovereign “Monaco Cloud”. This means that from 2021 Monaco will have its own safe and sovereign infrastructure. Another idea for overcoming the crisis is to create a Security Token Offering (STO) platform which is a blockchain fundraising system. This platform aims to attract new companies to Monaco, especially digital ones, to create around a hundred jobs each year and contribute € 150 million to the Monaco economy. You can find more about it here: https://mchercberg.com/2020/10/02/monako-gospodarka-cyfrowa-pragnie-przyciagnac-inwestorow-z-calego-swiata/
The principality also has a specific real estate market, which makes Monaco number one in Europe in terms of real estate investment. Investing in the real estate market in Monaco has many advantages. This is because Monaco prides itself in an economically and politically stable environment, which gives investors peace of mind. Moreover, property prices in Monaco compare well with other luxury markets. You can find more about it here: https://mchercberg.com/2020/11/01/rynek-nieruchomosci-w-monako-luksusowa-inwestycja/
Safety and cleanliness are another reason why many people choose to invest in the real estate market in Monaco. The principality boasts about one policeman per 100 inhabitants, as well as a state-of-the-art 24-hour video surveillance system. The crime rate in Monaco is also extremely low, making it extremely safe, even at night.
The city also has a strong ethos for environmental protection and sustainable development. Indeed, the principality currently aims to be carbon neutral by 2050. This green ethos is being embraced by new investments such as Portier Cove, which will be Monaco’s first eco-district. You can find more about it here: https://mchercberg.com/2020/09/29/la-portier-jakich-cen-mozna-sie-spodziewac-za-nieruchomosci-w-nowej-eko-dzielnicy-monako/
Taking the above into account, it should be noted that Monaco never intended to bring together the cultural diversity of the people, but simply created a platform that brings together different interests. This clearly reflects the fact that the territory of Monaco, which covers an area of two square kilometers, comprises 139 nationalities, of which only 37,308 inhabitants. All this makes the Principality of Monaco a kind of pearl on the southern coast of Mediterranean Europe.