The Monegasque civil company (SCI) is an excellent asset and wealth management tool, commonly used to facilitate the management and transfer of a real estate property in France.

In this respect, the gift of SCI shares can be used to anticipate the transfer of a real estate property and reduce costs.

However, in a Franco-Monegasque context, this kind of transfer may lead to a double taxation as regards of gift tax.

Indeed, the Principality of Monaco signed only one tax treaty with France on April 1, 1950 for the avoidance of double taxation with regard to inheritance. This agreement does not extend to gifts.

Therefore, each State retains the right to apply its domestic law.

In Monaco, gift taxes are only due on assets located in the Principality of Monaco or with situs in Monaco, regardless the domicile, the residence or nationality of the donor or donee.

As such, the shares of a Monegasque SCI are Monegasque intangible movable assets.

Thus, a gift of Monegasque SCI shares is in principle a taxable operation in Monaco, subject to the degree of kinship between the donor and the donee.

As a reminder, the tax rates vary from 0% (between spouses or in direct line) to 16% (non-related person).

We would also point out that the deed of gift must be drawn up before a Monegasque notary and that formalities to amend registration details must be completed with the Monaco Non-Trading Companies special registry "Répertoire Spécial des Sociétés Civiles".

In France, the territoriality rules depend on the tax domicile of the donor, the donee and the location of the assets.

In this respect, under French domestic law, the shares of foreign companies whose assets are predominantly real estate, i.e. whose assets are mainly of built or unbuilt real estate as well as real estate rights located in France.

According to French administrative doctrine and French Case Law, the concept of "predominantly real estate" is deemed to exist when the value of the real estate or real estate rights located in France represents more than 50% of the French company assets on the day of the gift.

Thus, the shares of a Monegasque SCI owning a real estate in France are considered as French assets subject to gift tax in France.

However, in the event of a gift by a donor who is not domiciled in France for tax purposes, the taxation will be limited to the proportion between the value of the real estate located in France and the total assets of the company (located in France and abroad).

As in Monaco, gift tax in France depends on the relationship between donor and donee. However, in direct line and between spouses, a progressive scale of between 5% and 45% is applied, after deduction of an allowance renewable every 15 years (€100,000 between parents and children and €80,724 between spouses). Other degrees are subject to gift tax ranging from 35% (between brothers and sisters) to 60% (non-relatives).

In addition to the Monegasque formalities, a declaration no. 2735 must be filed online within one month of the deed of gift or submitted in duplicate to the French relevant registration office with the payment of any duties due.

We therefore recommend you to plan any transfer of a real estate located in France owned through a Monegasque SCI with your lawyer. Depending on the situation, other transfer mechanisms may be preferable.

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.