While no income, capital gains tax or annual property tax is payable in Monaco, a property transfer tax has long since been imposed on a purchaser of Monaco real estate.
Introduced in 2011, the present law (the law 1.381) extended the application of the transfer tax to changes to, and transfers of, the effective beneficial ownership of entities owning existing real estate in Monaco.
Entities include companies, partnerships, trusts, foundations but exclude a Monaco civil company known as an ‘SCI’ provided it is owned by individuals (Entity).
Broadly, the law 1.381 provides for transfer tax of:
- 4.5% payable by individuals or by Monaco SCIs held by individuals on existing real estate (a reduced registration tax of 1% would apply for purchases of new build real estate)
- 4.5% payable in the event of a change in effective beneficial ownership of any Entity owning Monaco real estate
- 7.5% payable by any Entity on a purchase of existing Monaco real estate
To enforce the transfer tax payable by those Entities whose effective beneficial ownership changes, a regime of Fiscal Representation was introduced by the law 1.381.
Any Entity in whose name Monaco real estate is registered must appoint a Fiscal Representative whose responsibility it is to file annual declarations to the Monaco Tax Authority declaring whether or not a change in effective beneficial ownership has occurred in the relevant period.
If there has been a change in effective beneficial ownership, payment of the 4.5% transfer tax must be made over to the Tax Authority by the Entity concerned.
While the introduction of the 2011 law and the 7.5% transfer tax has reduced the number of Entities purchasing Monaco real estate, it remains a possibility.
It may well be an option worth consideration for those wealthy families whose wealth may be structured in foundations or trusts and who determine that the effective 3% premium for incorporating the real estate direct into an existing wealth protection matrix is worthwhile.
At Moores Rowland, Monaco we have wide experience in advising in the cross-border and international legal, tax and practical aspects of Monaco real estate investment and as an Authorised Fiscal Representative under the law 1.381, I would be delighted to advise.
Mary-Rose McLean, Head of Legal and Corporate Services at Moores Rowland, Monaco
T: +377 97 97 00 22
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