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Overview of Doing Business in Monaco

(Article in 1994 Off Shore Financial Yearbook)

By: James P. Duffy, III

     The Principality of Monaco is a sovereign state with its own royal family, parliament, constitution, and laws. S.A.S. Prince Rainier III, the current sovereign, traces his lineage to Guelfe François Grimaldi in the thirteenth century.

     Located by the sea near France's south-eastern border with Italy, the Principality is a small state of about 456 acres. Well known throughout the world as an international business center with an exceptional climate, Monaco has excellent cultural, educational, medical and sports facilities. In addition to an intense business and international conference activity, Monaco offers ballet, concert and opera performances, golf and tennis tournaments, and international car races, such as, the Monte-Carlo Rally and the Formula One Grand Prix, as well as a multitude of other events.  

     The business or non-business traveler has ready access to London, Milan, New York, Paris, and other major cities through nearby Nice International airport. Rail and road networks provide alternative means of transport to other parts of Europe.

     French is the official language, but English and Italian are widely spoken, particularly in international business circles. 

     The Principality has a code-based legal system that is often similar to the French system. However, there are important differences between the two systems.

Investment in Monaco

     No permission required. A foreigner does not generally need to be a resident in Monaco or to get permission from the government to invest. Thus, the foreign investor may purchase and sell securities through one of the many well-known international banks and brokerage houses, own shares in a mutual fund, open a non-resident bank account, or acquire realty. Additionally, civil companies are easily formed to own realty and for other forms of non-commercial investment. Prior governmental approval is not currently required to form a civil company. The general practice is to form the civil company with the minimum capital of 10,000 Frs. in about a week. The registered office must be in Monaco.

     Trusts. A foreigner whose national law permits trusts may create a Monégasque trust governed by his or her own national law. To form the trust, the founder must get a deed of trust from a Monégasque notaire (an important legal official) and the opinion of a lawyer listed with the Monaco court as an expert that the trust complies with that foreigner's national law. Trustees must also be chosen on a list maintained by the Monégasque court. Exceptionally, a co-trustee who is not listed with the court may be appointed for one single trust in Monaco.

     Trusts are subject to a 1.3% to 1.7% registration tax depending on the number of beneficiaries. The tax is calculated on the value of the trust's assets at the time they are transferred to the trust. Monégasque securities included in a trust's assets are taxed at a reduced rate of 0.05% to 0.45%. The rate will also depend on the number of beneficiaries.

     The trust deed may expressly opt for an annual registration tax of 0.20% instead of taxation at the time of transfer of the assets to the trust. In that case, any Monégasque securities will still be taxed at the special reduced rate. The trust is not subject to any gift taxes or death duties.

     Descent and Distribution. The Principality has forced heirship laws in favor of direct heirs or close parents. However, Monaco looks to a foreigner's national law to determine the applicable law for distribution of personal property on death. Foreigners who plan to reside in Monaco should find out if their national laws renvoi to Monégasque law in such a case.

     Thus, a foreigner who qualifies may want to explore use of a trust to protect local realty (or personal property in case of renvoi) from the forced heirship laws.

     There is no inheritance or estate tax on transfers in direct line or between spouses. In other cases, the inheritance tax rate for residents will be 8%, 10%, 13% or 16%, depending on the family relationship between the transferor and the transferee.

Doing Business in the Principality

      Government approval is required. One important difference between France and Monaco is that prior Monégasque governmental approval is always required before a foreigner may engage in commercial, industrial or professional activities inside or from Monaco. Governmental authorization is discretionary, but will generally be granted if the government considers the activity will be worthwhile for the Principality, and the foreigners have a good reputation, experience and solid financial backing. The activity must also be one that foreigners may lawfully engage in.

     The choice of an appropriate form of doing business will depend on several factors, such as the type of business activity, the location of its sales, and the personal situation of its directors and officers. The simplest form is the establishment of administrative offices or commercial agencies in Monaco:

     Administrative Office. The administrative office is often the branch office of a foreign company. The applicant agrees to allocate a minimum budget to its administrative office and is taxed on a percentage of the office's operating cost. The effective rate of taxation is 2.8% or 10.5% of the office's total operating cost, depending on the scope of the office's activities. The governmental approval process for an administrative office generally takes three months, assuming the file is complete.

     An administrative office cannot do business in its own name.

     Commercial Agency. After getting approval from the government, commercial agents are listed on a special register. A commercial agent must provide at least one agency agreement to get authorization to do business in Monaco and must supply information on his or her background, including financial information. The commercial agent who is not in breach of contract, is entitled to special compensation on termination of the agency, even when the agency agreement prohibits it.

Monégasque Companies

     The simplest forms of companies are the partnership ("société en nom collectif") and limited partnership ("sociétés en commandite simple et par actions"). However, foreigners often prefer to seek permission to form a corporation in order to get limited liability.

     The Monégasque government currently requires a minimum capital of 1,000,000 Frs. for a Monégasque corporation ("société anonyme monégasque" or "SAM"), which must be paid-in shortly after the formation meeting that follows governmental approval. In recent years, the Principality has become very selective in authorizing SAM's. This has created something of a market for the sale of existing SAM's. However, Monégasque law does not authorize any major change in activity for existing SAM's. Additionally, any change in a SAM's purpose clause is subject to prior governmental approval.

     The SAM must have at least two directors, one of whom should plan on residing in Monaco, and a local address for its registered office. The SAM must effectively engage in business or the government will ultimately withdraw its charter. Additionally, the authorities will not tolerate letter-box addresses or purely financial holding companies.

     Would-be directors and shareholders can expect to be required to provide background information as part of the approval process, including accounting statements for the last three years of activity. To avoid incurring unnecessary fees and expenses, the prospective shareholders and management should plan, before starting the approval process, on a preliminary contact with the finance ministry and, when necessary, any other government administration, in order to determine the likelihood of getting permission for the SAM. Experience also shows that it is appropriate to involve a notaire as soon as possible, particularly in preparing the SAM's purpose clause and articles of incorporation, and to review the application file informally with the commerce department before formally submitting it. The governmental approval process for a SAM generally takes about 6 months.

     Actual formation of a SAM requires a notaire whose percentage fee of 0.9% is calculated on capital. There is also a registration tax of 1.5% on capital. Other costs of around 25,000 Frs. should be anticipated, including the cost of official notices in the local gazette ("Journal de Monaco").

     A SAM requires one or two statutory auditors, depending on the amount of capital, who are chosen from a list of locally registered experts ("commissaires aux comptes").

     A SAM may not change the address of its registered office inside Monaco without prior regulatory approval, which will generally be granted if the move is to an appropriate location.


     Income Tax. The Principality does not have personal income or withholding taxes. French citizens who were not resident in Monaco for 5 years or more on October 13, 1962, or who are not otherwise exempt under the Franco-Monégasque Tax Treaty of May 18, 1963, are subject to French taxation as if they reside in France, even though they live in Monaco. France is the only country that has a tax treaty with Monaco.

     Businesses are subject to commercial and industrial profits tax at 33 1/3%, as soon as 25% or more of their gross income comes directly or indirectly from outside the Principality. The effective impact of the tax needs to be evaluated case-by-case.

     Companies are also subject to the 33 1/3% profits tax on income from intellectual property rights.

     VAT. The most prevalent value-added tax rates are 18.6% and 5,5%. The 18.6% rate is the standard rate. However, the 5.5% rate applies to many products, such as medical supplies, electricity, gas and water, as well as to certain services, such as public entertainment, public transport and travel agencies.

     Registration Tax. Generally, registration tax is levied on documents or certificates prepared by notaires or bailiffs, court decisions, lease agreements, sales agreements for shops, wills, transfers of real estate located in Monaco and certain corporate transactions and documents. Agreements that are not made before a notaire ("actes sous seing privé"), or that are concluded outside Monaco and do not involve real estate in Monaco, are only subject to registration tax if used as evidence in Monégasque legal proceedings. The rate of taxation will vary considerably depending on the instrument. For example, an accounting statement or sales agreement for an automobile is subject to a flat 5 Frs. tax, whereas the sale of certain realty is subject to a 6.5% tax on the price plus a 1% title recordation fee. Certain instruments, such as birth or death certificates or mortgage registry extracts are exempt from registration tax.

     Stamp Duties. Many legal instruments need to be written on "stamped" paper, in fact paper on which tax stamps are affixed. The rate depends on the legal nature of the instrument, such as certain forms of commercial paper, including promissory notes, most receipts, and official documents, such as work permits, officially certified copies and mortgage registry extracts.

     Customs matters. The Principality is part of France for customs and monetary purposes. Thus, goods manufactured in Monaco are not subject to tariffs in the European Union. Additionally, Monaco benefits from the progressive abolition of exchange controls in France.

Intellectual Property

     The Principality is a signatory to the Convention of Paris on the Protection of Industrial Property, the Arrangements of Madrid and Nice, and the European Patent Treaty.


     Foreigners may reside in the Principality for up to three months at a time without a residency permit. However, anyone planning on significant presence and activity in the Principality should apply for residency.

     Any non-French foreigner who wants to apply for residency in the Principality is required to apply first for a French long-stay visa at the French Consulate nearest his or her place of residency. The applicant will need to include the French long-stay visa with his or her request to the Monégasque authorities ("Sûreté Publique") for a Monégasque residency card, along with evidence of residency in the Principality. Residency is evidenced by ownership of property or a residential lease.

     The applicant will also need to show as part of the residency card application that he or she is legally employed in the Principality under a currently valid employment agreement or to provide a comfort letter from a local bank that the applicant has appropriate means of support.

     Residency cards are initially issued for yearly periods during the first three years, followed by three year periods over the next nine years. After which, the authorities may issue a ten year residency card. Issuance and renewal of residency cards is discretionary with the authorities.

     The applicant for a Monégasque residency card does not have to disclose the amount of his bank account or a fortiori his world-wide financial situation, but can expect to be asked to supply a police record and information on his background and activities.

     The Service des Etrangers insists on interviewing the applicant personally before issuing a residency card.

Legislative and Regulatory Developments in 1994

     The Fight against International Crime. The Fight against Money-Laundering from Drug-Trafficking and Organized Criminal Activities: The Principality of Monaco created the "Service d'Information et de Contrôle sur les Circuits Financiers" ("SICCFIN"), which is the governmental department that reviews and investigates reports by financial institutions, casinos and certain professionals, whenever they suspect they are handling funds from drug trafficking or from organized criminal activities (see, The OFC Report 1994/95, Banking, "Monaco's new rules to beat money-laundering," page 69, for a discussion of Law No. 1,162).

     To date, the SICCFIN has examined 33 transactions referred to it by the banks and conducted 10 oral investigations. The SICCFIN has referred three matters to the public prosecutor's office. Mr. Riey, the SICCFIN's director, says the cooperation of the banks has been excellent. Mr. Deflassieux, president of the Monégasque banking association ("Association Monégasque des Banques"), says all banking matters remain strictly confidential, except for customers who break the money-laundering law.

     The Principality of Monaco and France signed an administrative cooperation agreement on October 17, 1994, authorizing the exchange of financial information about funds from drug trafficking or from organized criminal activities. In response to a parliamentary question, Mr. Jean Pastorelli, the Principality's Minister of Economy and Finance at the time, said the Monégasque and French authorities would exchange information whenever the suspect behavior or conduct is illegal under the laws of both countries.

Creditors Rights

     The Principality recently modified its attachment procedures to henceforth authorize creditors to temporarily block funds, securities or other movables owed to their debtors, that are in the possession of third parties. A petition should be filed with the court clerk's office stating the amount owed. The office issues a receipt which is served on the third party.


     The payor's right to block payment of a check is restricted to cases of loss, theft, fraudulent use or the holder's bankruptcy.

International Treaties

     The Principality ratified the following treaties: The Conservation Treaty on Wildlife and Nature in Europe; The United Nations Treaty on Global Warming; the Treaty on Biological Diversity; The European Treaty on Culture; and the Treaty on Conciliation and Arbitration within the frame-work of the Conference on Security and Cooperation in Europe.

The United Nations

     In an interview published in Monaco Actualité dated March 1994, SAS Prince Rainier III considered United Nations membership was the single most important event for Monaco since 1985, along with completion of the Fontvieille district conquered from the sea. Crown Prince Albert is the head of the Monégasque delegation at the United Nations.

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