Monaco – The World’s Favourite Tax Haven
Monaco – The World’s Favourite Tax Haven
There seems to be a common characteristic of Europe’s tax havens – they’re all very small places! Perched on the Mediterranean at the southern tip of France and next to the Italian border, Monaco is smaller than New York’s Central Park! While Gibraltar and Montenegro are well kept secrets, the whole world knows about Monaco.
When the famous casino in Monte Carlo opened in the nineteenth century it generated so much profit that the Prince was able to abolish income tax on his citizens and lay the golden egg that has made Monaco arguably the most famous tax haven in the world.
Let’s take a close look at the Principality and where it might fit in your transition plans.
Monaco Facts and Figures
- Monaco is the world’s second smallest state – only the Vatican is smaller.
- It covers a mere 2.02 square kilometres
- They’ve been reclaiming land here since the 1880s, and a new project is underway to add to the world’s most expensive real estate just offshore from the Fairmont Hotel on the hairpin of the famous Grand Prix circuit.
- On average there are 303 days of sunshine a year.
- The population of Monaco is just under 37,000, of which less than 9,000 or 21% are native Monegasques.
- The other largest population groups are the French (28%), the Italians (19%) and the British (7.5%).
- Monaco has the world’s best life expectancy with an average across the population of 90 years of age.
- Monaco has been ruled by the Grimaldis since the 13th century with Prince Albert II and Princess Charlene the current heads of state.
- Monaco has the most expensive real estate in the world.
- Perhaps related to that, 32% of the population are millionaires.
- The Société des Bains de Mer, which runs the Monte-Carlo Casino, the Monte-Carlo Opera and the Hôtel de Paris, is Monaco’s biggest employer.
- Monaco levies no income tax on individuals.
- The Principality is not part of the EU but adopts some EU policies. It shares a custom union with France.
- Monaco uses the euro as currency
Things To See and Do in Monaco
Monaco Grand Prix – perhaps the most famous Formula 1 race of them all takes place around the narrow streets of the Principality in late May. It’s the only Grand Prix weekend to have Friday left completely free for meetings with sponsors and guests who all want to be at this race more than any other. The whole place is manic during Grand Prix week – many of the locals leave town to avoid it! If you want to be part of the action, but without the crowding, the most exclusive place to watch is the Amber Lounge. Coterie members can access tickets to the Amber Lounge so do enquire if that’s of interest.
Grand Prix Historique – in even numbered years such as 2020 and 2022 they hold another race meeting a couple of weeks before the F1 race. This celebrates the history of motor sport in Monaco and features cars from the 1920s to the 1980s. It’s my personal favourite because it’s a lot less crowded – you can wander around the paddock and meet the drivers on the Thursday, then enjoy grandstand views from all round the track for the rest of the weekend.
Formula E – May is a busy month for race fans in Monaco and, if you prefer Teslas to Ferraris, there’s now an annual Formula E race for electric single seaters. Battery technology has improved to the point where they no longer need to swap cars half way through the race, however they still don’t have enough range to use the full circuit so they race on a specially shortened 1.7 kilometre course.
Oceanographic Museum – founded by the late Jacques Cousteau, the Oceanographic Museum of Monaco is an amazing experience that really brings the oceans to life in a way that links art and science. There’s a colourful collection of tropical fish in its enormous aquariums plus a shark lagoon and a turtle island among the 6,000 or more specimens on show.
Jardine Exotique – as its name suggests, this hillside space established back in 1933 pulls together plants from all round the world including the Americas, Africa and Arabia. If you’re fit enough for the 300 steps you can also go down the cliffside into the cave and see a stunning collection of stalagmites and stalactites. Bone fragments collected here suggest that prehistoric man had already discovered Monaco before income tax had even been invented…
Monte Carlo Casino – the world’s most famous gambling den is a magnificent building in the Monte Carlo district of the Principality. It is the goose that has laid the golden egg for what Monaco has become today. Before it came into being in the mid 19th century this was poor farming land. But, at the invitation of the mother of Prince Charles III, successful casino operator Francois Blanc set up the Societe Des Bains de Mer et du Cercle des Etrangers (literally the swimming pool company and circle of foreigners!) As mentioned above, this company still exists and has gone on to be one of the most important in the Principality.
So convinced of the economic potential of the casino were the ruling family that, in order to raise the money to build it, they sold 80% of their kingdom to France for 4 million francs and the promise of a road and a railway line from Nice to Monaco. Roquebrune and Menton thus became part of France while the profits from the casino were such that the prince was able to abolish the taxes paid by his people!
The Prince’s Palace – originally built as a Genoese fortress in 1191, the palace is unique in that the Grimaldi family have lived there for more than 700 years. Apart, that is, from a twenty year exile in the 18th century when the French seized it and stripped it of its treasures. The lack of land in Monaco means that, unlike the Queen at Sandringham, Windsor or Balmoral, there is nowhere else for the Grimaldis to build new palaces. So their one and only palace has always been well fortified to protect its occupants from a repeat of the French invasion. The austere walls of the palace became sprinkled with stardust in 1956 when Prince Rainier married American actress Grace Kelly, the golden couple becoming symbolic of the glamour of the French Riviera in the 1960s and 1970s.
The Prince’s Car Collection – Albert’s dad, Rainier III, was a real car enthusiast and began collecting classic cars in the 1950s. Eventually the 100 plus cars outgrew the garage in the royal palace so a new museum was opened in the Fontvieille district in 1993. The 5,000 square metre site houses everything from a 1903 De Dion Bouton to a 2013 Lotus Formula 1 car as well as the Lexus used in the most recent royal wedding in 2003. If you prefer your cars to be stationary rather than whizzing round a track, then head across to the Prince’s collection and while away an hour or two among some precious motoring artefacts.
Residency and Citizenship in Monaco
This is definitely not the easiest place in which to gain residency, while citizenship is almost impossible to achieve.
The starting point is to open a bank account and deposit an absolute minimum of €500,000 per main applicant. Some banks will want €1 million or more before they will open an account for you, but this is the statutory minimum. And that money has to stay in the bank throughout your period of residency. You then need a suitable home in Monaco large enough for the size of your family. So a couple will be OK with a one bedroomed apartment while a family of four would require at least a two bedroomed apartment.
There’s a security check to make sure you’re not a drug dealer or money launderer followed by a residence interview to assess your suitability. Assuming everything is in order you’ll then have a wait of around 8 weeks if you’re an EU passport holder or 16-20 weeks for non-EU passport holders – any Brits had better apply before December 2020 while your passport still has EU written on it…
Once you get your residency card it is renewed annually for the first 3 years then you receive a 3 year card. At year 10 you may be granted an unlimited Privilege Card but that’s entirely at the government’s discretion.
If you want to go beyond mere residence into the realm of Monegasque citizenship, the qualifying conditions are tough. You need to have continuously lived in the Proincipality for ten years and you must renounce any other citizenship that you hold. Monaco does not recognise the concept of dual citizenship so you have to burn all your other bridges in order to get that rarest of passports. As an aside, you must not be eligible for conscription into the armed forces of another country at the time of application.
All in all, I can’t see the benefit of moving beyond residency. If you want to live in Monaco, run a business there, enjoy the climate and the tax perks, you can do all that as a resident. Giving up other citizenships feels like the opposite of what we are trying to achieve as global citizens so, in my opinion, citizenship here is a step too far.
Property In Monaco
Real estate prices in Monaco are not for the faint hearted. Unless you’ve lived in Hong Kong or Singapore, paying seven figures for a broom cupboard may come as a shock.
But, when you scratch below the surface and understand how the market works, it can start to make sense.
In order to fund a property purchase you will need a good relationship with the right private bank. Whether or not you are looking for residency, the bank will require you to deposit at least €500,000 or 30-40% of the property value with them.
Given the pathetic rates of interest on offer for bank deposits, that may sound unattractive. However, the bank will then lend you 100% of the property value on an interest only mortgage at extremely attractive rates.
One example I looked at recently with our Monaco broker was a 5 year fix at just 1.1%. So you could own a €2 million, one bedroom apartment in Fontvieille for a monthly cost of around €2,000. When you consider that, in 2018, the latest year for which figures are available at the time of writing, property prices in Monaco went up by an average of 18%, that’s a €360,000 capital gain on an asset that cost you €24,000 while living in one of the lowest tax regimes on earth.
There’s very little new property development in Monaco so we have partnered with a well established estate agency to bring you a selection of homes at every price point from around €2 million to €25 million plus. Just fill in your details in the form below and you’ll be taken straight to our latest collection of Monaco properties.