A small enclave located on the French Riviera, quite close to the French-Italian border, turns out to be one of the world’s richest and most attractive countries. The Principality of Monaco, as this territory of only 2 km2 of extension (the second smallest, after the Vatican City) is officially called, is one of those places on the planet that fulfills the desires and fantasies of those who look for a life of luxury.

Home to the highest number of millionaires per capita globally, Monaco is a paradise for the rich. Its famous marinas, scenery, and top-of-the-line, late-model cars are undoubtedly a huge attraction for those who can afford them.

A favorable climate, an enviable geography, with beautiful coasts in the west, the low Alps in the east and, of course, a quite favorable fiscal and tax regime, make Monaco a paradise where businesspeople and the wealthy from all over the world live with all the luxuries they can imagine.

Form of Government

Composed since 1911 as a Constitutional Monarchy (headed since the 15th century by the Grimaldi dynasty), the principality has its own political, legislative, judicial and local organization, with a police force and a royal guard known as the Prince's Carabinieri Company, while foreign affairs, as well as security and defense matters, are in the hands of France.

Thus, the executive power is held by the Prince or head of the royal family, a hereditary title among the Grimaldi family’s descendants, together with a Minister of State (appointed by the prince, after consultation with the French government), who heads a 6-member cabinet.

This little state was a French protectorate until 1815, when it became independent. Even then, by 1918, a defense treaty was signed with Paris, where its autonomy was respected, but the principality was forbidden to oppose the political, economic, or military interests of France.

By the 1960s, after a year of great tension, Monaco and France signed in 1963 a series of agreements that would shape part of the Monegasque economic and fiscal policy, still in force today, such as the tax on profits of companies with more than 25% of their profits outside Monaco, transactions, and determinations about French citizens living in the principality.

Monaco's Economy

Monaco's economic activity is centered on tourism, on the continuous development of a small, non-polluting industry, divided into banking, insurance, and construction. Likewise, they pursue the promotion of a broad portfolio of services, boasting an impressive annual GDP of $6.006 billion for the year 2010. The majority of its population (31,223 inhabitants) has a high standard of living, 68% of which is made up of migrants from all over Europe, the U.S., and other regions.

This small territory is the annual venue for countless events that bring together personalities from all over the world, from the rich and famous to those tourists who want to live a different experience. Important fashion shows, parties, and events such as the mythical and traditional "Monaco Grand Prix" of Formula 1, the world's premier motor racing category, are part of an extensive list of tourist attractions. All this also generates a significant portion of Monaco’s income.

When analyzing the Monegasque economy, there is a crucial element that deserves to be mentioned, given the great impact it has on the country. This element is none other than "gambling," chance, or simply betting. Since 1854, by Prince Florestan I, gambling has been legal in Monaco. First, as a measure aimed at increasing the wealth of the royal family, and today, knowing the tremendous existing attraction in the country (with the majestic Casino de Monte Carlo being the jewel of the crown), it is emerging as one of the biggest money brokers in the world. Thus, it is a mandatory destination for those who visit the principality.

Besides being an impressive tourist destination with hundreds of attractions and places to visit, Monaco is also the place of choice for many of the wealthiest people worldwide to settle down. Given the great environment, the comforts of an incipient economy, a practically null crime rate, the living standards have nothing to envy to other European metropolises or anywhere in the world.

Furthermore, as if that were not enough, Monaco has an excellent and profitable tax regime for those who enjoy Monegasque residency.

Investing in Monaco

For any business to grow and increase its value, continuous and robust capital is necessary. In such a small territory, as indeed is Monaco’s Principality, the range of investment options is not very wide, but that does not prevent the generation of excellent profits for those who provide that capital.

In addition to the industries above that provide revenues to the national treasury and also to the private individuals who manage them, the real estate business is one of enormous proliferation throughout the territory of this small "city-state." The luxury housing, the exclusivity of its urban areas, and the high quality of life that abounds in the principality allow this business to be one of the most fruitful.

What is the reason for this? Mainly due to the small territorial extension that Monaco has. With so little physical space, the present buildings and those still under construction will always be in great demand by those who wish to settle in the territory and who also have the means to pay for them. 

An enormous attraction for these investments lies in the fact that Monaco’s Principality is one of the few countries that does not charge property taxes, which means that when you buy a property, it becomes undeniably yours, without any interference from the state or the tax system. 

However, despite being a fairly stable business and capable of generating large profits for those who venture into it, it is not cheap at all. According to a study carried out by the real estate services provider "Savills,” in 2017, the principality ranked the most expensive cities in the world to buy real estate, surpassing Hong Kong, New York, Paris, London, and many others. Within this exclusive territory, surrounded by sea and mountains, with about 800,000 euros, by 2018, you could buy a property of just 16m2.

Banking and Tax Policy

Originally with a basis for Monegasque citizens, the Principality’s banking sector has expanded its offer to non-resident clients, giving the reduce number of Monaco’s nationals (only 7.600 of the residents are citizens and the other 25.000 are foreign residents).

In Monaco, banking is regulated and by the Bank of France and has over 300.000 accounts, of which 85% belong to non-Monegasque residents. Tax optimization and the residents and non-residents’ ability to open bank accounts in Monaco are the cause of the high number of accounts in a country with such a low population.

The principal private banks on the Principality have a broad portfolio of services, going from multi-currency deposit accounts, equity and fixed income trading, a wide range of multi-currency investment funds, as well as precious metals and foreign exchange and commodity trading platforms. 

Contrary to what is commonly believed, Monaco is not a tax haven where large conglomerates and companies can go looking to evade taxes. It has done a ton of hard work not to be perceived as such, implementing different rates or taxes through its tax regime. 

After this flagging, the Principality redirected its efforts towards cleaning up its image in the international community and markets. They came up with a much more adequate and structured tax program, with more trained personnel. This led to signing cooperation treaties with Spain, Belgium, Portugal, and Luxembourg. Then, in 2014, bec84th jurisdiction began to participate in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, promoted by the OECD as a mechanism aimed at tackling tax evasion.

Monaco does not charge income taxes to its citizens, except for French citizens who have not been able to justify having lived for 5 years on Monegasque soil before October 31, 1962, which is subject to French tax policy. 

Albeit Monaco does not charge property or capital gains taxes to its nationals, the principality does have a tax policy for the inheritance of assets located in the country, categorizing them as a) direct line (0% tax); b) between siblings (8%); c) uncles/uncles/nieces/nephews (10%); d) between other collaterals (13%); and e) between non-family (18%).

Similarly, the government established low tax rates for foreign companies that have established their operations and earn 75% of their profits on Monegasque soil. Otherwise, if the companies obtain more than one-third of their profits outside Monegasque territory, they will be subject to a tax rate of 33.33% on those profits. Also, as part of its fiscal policy, Monaco’s Principality established a value-added tax (VAT) rate of almost 20%.

In conclusion, the Principality of Monaco, with a stable government and economy, good investment opportunities, and great attractions, can be considered the perfect destination for a dream vacation or as a place to retire after a life of hard work and effort. It is no coincidence that 35.15% of its inhabitants are people over 65 years old. Its comforts, climate, environment and great quality of life provide the necessary conditions for those who like and can afford the good life. At the same time, it is quite place for investment areas of tourism, gambling and real estate. As usual, we have top experts eager to offer their services to you. Contact us now and we will put you in touch with them.