9 Sep 2003 - La Magie Monégasque
| MONACO
CORPORATE SECRETARIAT International tax planning Protecting your assets is our mission One gets to Monaco by flying to Nice and then taking the six-minute helicopter service directly to the principality, or one can opt for the bus or taxi services which take about 45 minutes. The principality of Monaco is a country situated in southern France on the Mediterranean, 18 kilometres from the Franco-Italian border. Small in size, Monaco measures 3.3 kilometres lengthwise by 0.6 kilometres wide. Building is a constant to Monaco, the current project being the extension of the port which will double the berthing capacity for yachts and create a berthing area for cruise liners and reshape the port as we know it. To balance things out, over 20% of Monaco is green. Of the numerous parks Monaco offers, one of the finest is outside the main casino and houses an open-air museum, named 'The Sculpture Trail'. The resident population of Monaco comprises about 32,000, of whom approximately 7,000 are Monégasque nationals. Just under 40,000 people work in the principality, of whom 500 are employed by the local police force, meaning that there is a 1:64 ratio to the residents. The result is a fairly civilised and safe environment. When a big event -for example a football match - is held in the local stadium, more police are hired in ensuring security for the locals who all say generally speaking it is a place where one can go out to dinner and walk home safely afterwards. Monaco residency for individuals offers a person the unique advantage in the world today of living in a country which does not tax its residents on their income or capital gains (unless one has French nationality). A Monaco resident does not even have to lodge a tax return. 'Thus becoming a Monaco resident is the ultimate tax planning arrangement for medium and high net worth individuals' says Derek Smith, director of Monaco Corporate Secretariat. Furthermore none of the usual personal taxes are applicable in Monaco, except VAT which is the same rate as in France, 19.6 per cent; an exception are items under the reduced rate of 5.5 per cent. Therefore there is no wealth tax, rates or even television tax, although there is stamp duty and local taxes on registration of certain legal acts, real estate and related transactions. The Monegasques make no tax claims on donations or inheritance provided they are either in a direct line, or between spouses. There is inheritance taxation when a non-related party or further removed family member is the beneficiary scaled to the current ceiling of 16 per cent. Slight difference to neighbouring France, and even then there are ways of securing one's assets in a Monaco 214 Trust to minimise inheritance taxation and forced heir-ship issues on property. 'Becoming a Monaco resident is not difficult, providing you do not have a criminal record, and is certainly not just for millionaires. To obtain residency you must rent a flat in Monaco suitable to your needs, for example if you have a wife and three children you cannot rent a studio. Rents have currently stabilised in Monaco, and apartment rents are no higher then the better areas of London (Kensington) or Paris (16th), and certainly well below Hong Kong or Tokyo levels' says Smith. After renting a flat (if you are not a E.U. passport holder you will need a visa) you are extensively interviewed by the Monegasque police who prepare a dossier on your life history, to include both professional and personal details. Finally the Monegasque police will require a certificate from your bank stating that you have enough funds to support yourself and your family, or proof of employment locally as may be the case. While each bank has its own idea of what 'enough funds are, traditionally it 'has meant having enough money in your account on the day that the certificate is requested to pay your rent for two years. A ball park figure of Euros 100,000 seems to be the order of le jour, although two differing amounts were quoted from within one of the banks. Of the 70 investment houses conducting business in the principality, there are 45 banks; So, one can safely say that the banks are well represented in Monaco. Banking rules have changed over the years and a local association aimed at protecting banks and the principality generally from money laundering has formed. The 12th Monaco World Summit held in October addressed money laundering, and a conference - to be held in December - will pass information onto the local businesses involved in offshore management and banking. Due diligence is a word about town, and ?know your own clients? one of the catch phrases of the local professional world. It would therefore be wise to be either introduced to a bank in Monaco by a locally based professional, or transfer to a local branch of a bank you are currently with and who know you personally. Monaco is also one of only four jurisdictions in the world ? the others being Andorra, Liechtenstein and San Marino ? that has refused to cooperate with the Organisation for Economic Cooperation and Development on the issue of information-sharing. A particular benefit for investors who are keep to keep their fiscal affairs private. | |
| To retain Monaco residency
one should reside in Monaco for 183 days in a year. This said, there is some
tolerance based on one?s profession; for instance someone in the entertainment
business may be on location elsewhere for anything up to nine months in a year,
and in these cases the authorities usually will look at three months. As one
resident told me 'the secret is not to abuse the system'. There is a lively expatriate and local community with more events than days in the year organised. While Monaco is probably better known for its sporting events like the tennis (the Monte Carlo Masters Series) and the Monaco Grand Prix, Monaco has its own opera house, which I am told is an exact replica of the Parisian Opera House, its own ballet company and a symphony orchestra. It also has several theatrical productions each season in both English and French, as well as the annual circus festival. Many of these events are attended by the Monegasque Sovereign Family which gives an added attraction to the locals. 'The Sporting' overlooking the sea is well frequented for its splendid gala evenings where everyone from Elton John to Deep Purple have performed and houses the well known nightclub 'Jimmy'z'. The international school has a big emphasis on languages and costs between €4,000 and €14,000 a year depending on the age of the child and is suitable for the child who has little or no French language. There is also a selection of French language private schools in Monaco which are smaller than the state schools for reasonable fees. The local public education system is of good standard, offering several schools from nursery school to technical college, generally free of charge except for books and extras. The schools' teaching programmes follow that of the French educational system. What is particular to the Monaco educational system is that Monegasque history and language is taught in the primary and secondary schools, as are religious studies. An international option is available offering approximately 8 hours of English studies a week covering various subjects for example history and geography in English, including American history. Sport is not usually included in the curriculum in Monaco, however local sports, carting or sailing teams and facilities are available on the Wednesdays and Saturdays that school is not attended. Monaco also has a dance & music academy and an art school to complete its educational spectrum. At University level, the International University of Monaco offers under and postgraduate courses conducted in English, including their excellent MBA program. Managing your affairs As a Monaco resident, you can conduct your worldwide personal business from home. An individual can employ several house staff, personal secretaries, assistants and accountants. There is paperwork to complete to do this, and having obtained an employers number and filed an offer of employment, the employment office will try and find you a local unemployed person to fit your requirements who you will be obliged to interview, although not necessarily employ. Social security and pension charges vary to some extent depending on salary, but generally are just over 28 per cent of gross wage to the charge of the employer, and 12 per cent to the charge of the employee in form of social security deductions. One advantage to being an employee is that the pension scheme in Monaco builds up on a points system according to salary and as a foreigner one is only required to work for 10 years in Monaco to qualify for a pension. Another is the health system, which allows one to choose the doctor or specialist of one's choice; with Professor Vincent Dor, one of Europe's leading heart specialists in Monaco, this is an attractive advantage. 'The National Health Scheme is mainly for employees and the self-employed' says Eric Blair, insurance agent, who recommends taking cover for both health costs when travelling and the portion of cost not reimbursed by the state system. 'If you benefit from State health coverage, the top-up scheme will only reimburse expenses on the condition that the State scheme does first' he says. If you are considering moving your family to Monaco without immediate employment, while Monaco has some agreements with neighbouring countries like France and Italy with regards to healthcare, it would be advisable to take out complete cover either locally or as Martin Garcia at Goodhealth in London recommends 'a no boundaries program,' which he explained could be customised to include worldwide cover and costs to return home if for some reason surgery was required although Monaco has adequate hospital and clinics. Setting up business in Monaco comes with fairly stringent rules and vetting procedure from the Monegasque authorities before they decide if they will grant a company or personal license to conduct business in the principality. Authorisation often takes six months to come through, meaning setting up business can be a costly operation. While there is no taxation on international companies' profits managed in Monaco, Monegasque businesses generating more than 25 per cent of their annual sales outside of Monaco pay the company taxation rate of 33.33 per cent. The tax is assessed on the net profit of the business, allowing for various deductions including payments to administrators or managers who actually operate the firm. 'If the suggested review of the U.K. domiciled rules take place' says Derek Smith, 'then Monaco is an attractive location for current resident non doms to move to.' Indeed. Monaco Corporate Secretariat's file notes on moving to Monaco: In more detail : - Becoming a resident There is no minimum time you must live in Monaco to apply for a residents permit - Days required per annum To remain as a Monaco resident one should reside in Monaco 183 days in any calendar year (in practice the authorities will really look at 91 days only - the secret is not to abuse the system) - Property ownership/lease To become a resident one needs to rent (not buy) an apartment suitable to your needs (i.e. if you are single you may rent only a studio, but if you have a family of three children then you would need to rent a large four room apartment suitable for a family). Rents in Monaco have been in the past equivalent to the better areas of London or Paris, however after five years with a relatively flat market, rents have shot up over the last year. Looking at today's newspaper studios in a new building go for between € 1.000.- and € 2.300.- per month, one bedroom apartments for between € 2.500.- and € 4.500.- per month and three bedrooms from € 4.000.- to € 10.000.- per month. - Minimum wealth requirements The banks must certify to the Monegasque authorities that you have sufficient means not to become a burden on the state, thus it is up to your bank to tell you what they consider the amount of money they need to have in your account with them to satisfy this requirement. In the past one has been able to deposit with your bank an amount as low as the equivalent of two years rent on your apartment to get this certificate. However please note that the banks here have recently been deluged with funds from the Channel Islands and Switzerland, and I note (from their treatment of opening bank accounts for offshore companies) that they are steeply upping their limits for amounts that require to be held on account. - Other factors To become a Monaco resident if you are not an E.U. passport holder, then you must apply to the French consulate in the country where you reside now for a Visa. You (all people including E.U. passport holders) will need to get from your local police where you live now a certificate stating that you do not have a criminal record. Once you have these then you must rent a Monaco apartment and deposit with a local bank the amount of funds which they require to issue the certificate of personal means to the Monegasque authorities. You then apply to the police in Monaco for a residency card, the police will conduct an exhaustive interview with you asking questions like what your parents did, where you went to school, what you have done since school, where you have lived, why you have come to Monaco, who your brothers, sisters and children are (with births of certificates etc.) and they may also require a detailed C.V. on you - Inheritance tax Monaco real estate property falls under the forced heir-ship provisions and all other world-wide property suffers inheritance tax. However people who have originated from common law countries or countries that recognise trusts are allowed to create (using a Monaco law firm only) a law 214 trust which gets around a lot of these issues. Derek Smith is a registered co-trustee and co-ordinate this for you. - Capital gains and income taxes For resident individuals there is no personal taxation what so ever. Thus both income and capital gains are completely tax free in the hands of the resident individual. - Standard rate of tax Nil for individuals. - For introducing a person into Monaco to become resident, assisting to find an apartment, insurance, electricity and telephone operational, introducing a person to a bank and assistance to open a bank account, arranging the appointment and for obtaining the carte de sejour, assistance with arranging the required paperwork and medical check, and a Monegasque drivers licence MCS charges around € 9,500.00. - Monaco companies Monaco companies themselves are few and far between for foreigners as each person wanting to promote a company must go through a very detailed licence vetting procedure from the Monegasque authorities before these authorities decide whether they will grant a company licence. Included in this vetting procedure is proof of real activity, experience of the Directors in that activity and proof that the proposed Directors have never been bankrupt or have a criminal record. Each Monaco company has a very narrow and strictly defined objects clause of what it can do, must have a share capital of at least € 500.000.-, must rent offices before incorporation of at least 120m2 and employ five full time at the time of incorporation. If the government here grants a company licence, incorporation takes place before one of the two Monaco Notaries. Licence vetting through to incorporation takes a minimum of six months and Notarial and legal costs amount to over € 60.000.-. If Monaco Corporate Secretariat can be of assistance or for further information please contact: Derek R. SMITH of MCS E-mail: assetprotect@libello.com Phone: +377 9797-6230 Fax: +377 9797-6233 While every effort has been made to ensure that this information sheet is accurate and up-to-date we cannot be held responsible for any errors or omissions. | |