In the Principality of Monaco, a huge number of properties are held through offshore special purpose vehicles to ensure both confidentiality and tax efficiency. As a matter of fact, such structuring allowed owners to benefit from a very tax efficient structure to transfer Properties in Monaco.
As opposed to the then applicable Monegasque taxes and other costs of 10% ( +/- 8% of land registry and stamp duties + 2% of notary fees), the disposal of shares of a foreign entity owning real estate in Monaco did not trigger any tax consequences in the Principality of Monaco.
As a consequence, in the last decades, an always growing number of real estate transactions in Monaco were structured through such very simple transfer of shares with no payment of any tax, and no communication whatsoever to the Monegasque Authorities.
At the same time, the income derived from the taxation on real estate transactions decrease significantly and the Principality progressively lost a huge part of its tax revenue.
Law NR 1381 Of 29 June 2011 – 4.5% Taxation For Disposal Of Shares Of Entity Owning Real Estate In Monaco And Annual Tax Declaration
As a consequence, last year, the Principality of Monaco tax legislation relating to foreign entities that own real estate property in Monaco has been substantially modified by the Law Nr 1381 of 29 June 2011, with immediate and significant consequences.
From this very same date, the disposal of Foreign Entities owning a property in Monaco have become taxable at 4.5% of the asset market value and pertaining rights. This will affect a large number of entities including companies, foundations, trusts, certain investments funds and insurance policies.
In order to control the transactions affecting the shares of foreign entities owning real estate property in Monaco, LAW NR 1381 OF 29 JUNE 2011 also created the obligation to appoint a qualified Professional Agent in Monaco and to report on an annual basis any change, if applicable, in the beneficial ownership of the corporate structure.
The first declaration under this law must be completed and files within the 30th of September 2012, and shall be related to the period beginning from the 30 of June 2011.
For those who shall not comply and fail to appoint a qualified Professional Agent in Monaco, an annual tax equal to 1.5% of the market value of the asset and pertaining rights will be imposed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
