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by Zsolt Szemerszky

Zsolt Szemerszky

Taxation

Taxation

Despite the common belief, Monaco is not an offshore jurisdiction. Having a business in the Principality involves various taxation obligations as well. Luckily Monaco’s tax regime is built on some extremely supportive pillars. 

As a new business owner, you have the possibility to start and build up your business without interfering with any taxation issues. During the first two years of business operation, your company is tax free, which can support the establishment and improvement of your business. 

After three years, you will be due to pay tax, but not based on your income. In the Principality  of Monaco, the corporate taxation is mainly based on revenue. Therefore, you only pay tax if you are able to gain profit from your business activity (and if you have not transferred your revenue to yourself as an annual bonus, because in that case, no revenue stays in the company and there is nothing to pay for tax). 

Without any doubt, Monaco’s taxation is very attractive for businesses comparing its profit-based taxation method to most of the income-based taxations offered by other countries. 

Talking about taxation, Monaco also maintains its strong reputation when it comes to confidentiality. Just to compare Monaco to Switzerland, forty-one Swiss banks recently signed an agreement with the US Government that they will disclose how they helped the US citizens to avoid their taxation obligations. And if it is not enough, they will even disclose the name of the involved bankers and financial advisors.

Disclosing confidential information was unimaginable in Switzerland before; now, it has become a reality and very real threat to the millionaires (which luckily drives more attention to the Principality of Monaco).

Of course, this dramatic wealth management and banking situation in Switzerland started already in 2009, when one of the biggest bank in Switzerland, UBS was accused by the US government. The case ended with a settlement payment of 780 million USD, but it was just the start, since the USA accused fourteen more banks in Switzerland.

After putting strong pressure on the Swiss banking system, the USA took a very new approach. They offered a clean start without any examinations of all the banks who are ready to reveal their best practices for avoiding taxes. Although the offer had a very tricky part as well, since the reduced penalty depended on the fact of how many clients these banks were ready to disclose, including their bank account details, as well as all the financial advisors and bankers who were involved with those clients and accounts.

This is something unimaginable in the Principality of Monaco. All government experts know that if they were to disclose the assets of their clients, they would lose trust, and the Principality would risk a heavy financial crisis. Monaco puts its residents first and this will hopefully never change.

Monaco’s taxation system is smart and built on strong pillars.

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