Transactions carried out abroad through a permanent establishment, a dependent agent or a complete cycle of exchanges abroad are not taxed in Monaco (Monaco using a principle of territorial taxation) but are taken into account when determining the turnover of transactions carried out abroad. The management/service activities of the registered office of international groups of companies, although they are not considered industrial or commercial, may be taxed in Monaco depending on the contribution of the registered office to the group`s overall turnover, which is determined according to specific rules. The legal form of an undertaking is not relevant for the application of the CIT. Consequently, whatever their legal form (partnerships such as civil society or limited liability companies such as the Monegasque Public Limited Company (SAM) or the Limited Liability Company (SARL)) carrying out civil law activities, do not fall within the scope of the CIT. As there is no income tax in Monaco for natural persons residing in Monaco (with certain specific tax rules for French nationals), the profits made by these “civil companies” are not taxed in Monaco either at the level of the company itself or at the level of its shareholders residing in Monaco. Monegasque tax legislation provides for strict rules of confidentiality and secrecy with regard to tax information. In some cases, however, other Monegasque authorities may obtain information on taxpayers. Monegasque tax legislation is very stable and is amended from time to time – Monegasque legislation governing Monegasque corporate tax (i.e. income tax) (“CIT”) is amended from time to time to comply with French corporate tax legislation and BEP regulations. However, in addition to the special provisions applicable to administrative offices (see our comments on section 15 above), Monaco has the following two categories of tax relief: Article 9 of Sovereign Regulation No.
6.713 explicitly provides that the MTA may use country-by-country reporting to verify that the transfer pricing policy of an eligible international group complies with transfer pricing rules (see our comments below under Section 9). Monaco`s undercapitalization rules apply to all loans granted to the borrowing company by a related party: two companies are deemed to be affiliated (i) if one company holds, directly or through an intermediary, the majority of the share capital of the other or exercises de facto decision-making power, or (ii) if both companies are under the control of a third party (e.g. sister companies). Companies that generate more than 75% of their turnover in the Principality of Monaco are therefore not taxable. The general principle of taxation in Monaco is the total absence of any direct tax, without income tax in Monaco and without corporation tax for companies operating in the Principality. The Principality has successfully tried to diversify into high-quality and environmentally friendly services and small industries. The state has no income tax and low corporate taxes, and thrives as a tax haven for individuals who have residency and foreign companies that have established businesses and offices. The State retains monopolies in a number of sectors, including tobacco, telephone and postal services.
[ref. needed] With regard to Action 14 on dispute settlement, the OECD published a report on 24 January 2022 reflecting the results of Level 2 peer monitoring of Monaco`s implementation of the Minimum Action Standard 14. According to the report, Monaco meets the Action 14 minimum standard. Government of Monaco. “Legislative texts, Monaco: Decree No. 3.037 of 19.08.1963 making enforceable in Monaco the Tax Convention signed in Paris on 18 May 1963.” Retrieved 6 April 2020. The Monegasque tax authorities (“ATM”) are the main regulatory authorities responsible for managing the tax system. So far, no BEPS recommendations have been implemented in Monaco on the OECD`s latest two-pillar solution to address the tax challenges posed by the digitalisation of the economy. To our knowledge, no tax bill has been proposed in this regard. French customs regulations therefore apply to Monaco. Regarding property taxes: There are no property taxes in Monaco.
This restriction applies to affiliate loans if the borrower is considered undercapitalized. Monaco is integrated into the European customs territory (although it remains a third country compared to the EU). The goods and services of the European single market are thus accessible from Monaco.