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The Principality of Monaco is a city state located in the South of France (the country is regarded as having been “notched” out of French territory), on the Mediterranean Sea. The second smallest country in the world, Monaco has been an independent constitutional monarchy since 1911. The country has more than 36 000 inhabitants and is ruled by Prince Albert II of Monaco.

The Monegasque economy

The city state primarily derives its income from its services, VAT, trade and real estate activities. Well known for its image of luxury and money, Monaco has the highest GNP per capita in the world, with 222 022 dollars per capita in 2008. Tourism in Monaco is also an important sector, also focused on luxury, with the famous Casino de Monte-Carlo.

From an industrial point of view, the Principality has about 100 small non-polluting business with a high added value. The city is also considered to be the second most expensive in the world from a real estate point of view, with the best locations costing up to EUR 35 000 per square metre.

The Monegasque tax system

Since 2002, the Euro has been incorporated into the Monegasque economy, and VAT is the same in France. In fact, Monaco passes on its VAT profits to the French state, with the latter then returning a percentage of this amount. Long regarded as a tax haven, Monaco still has an advantageous tax system.

Firstly, Monaco-based companies are free of any taxation, unless the company makes more than 25% of its turnover outside the Principality, or if its income comes from patents or property rights. In this case, profits are taxed at 33.33%.

Secondly, the inhabitants of Monaco pay no tax on income, capital gains or capital. A French national living in Monaco, however, does not fall under this system and is therefore subject to taxation in accordance with French legislation.

Creation of a company

The various types of companies that can be created in Monaco are as follows: the partnership, limited partnership, the partnership limited by share, the Monegasque limited company and the limited liability company.

Government approval is required to start a business. The applicant must have serious financial guarantees and the project must be of interest to the Monegasque economy, failing which the application will be rejected. The creation of a company requires a formal application submitted to the Directorate of Economic Expansion.

International trade

Monegasque customs policy is identical to French policy, since the Principality applies the European Economic Community’s customs arrangements, without actually being part of the EEA.

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