Monaco presents a notably favorable tax environment, particularly concerning inheritance and gifts within immediate families, which are typically exempt from taxation. Furthermore, Monaco generally does not levy a wealth tax on its residents, making it an attractive jurisdiction for high-net-worth individuals. However, it’s essential to understand the specific regulations and the implications of the Franco-Monegasque Tax Treaty, especially for French citizens. The advantageous inheritance and gift tax treatment applies solely to assets situated within Monaco.
Inheritance tax in detail
In Monaco, inheritance tax is applicable only to assets physically located within the principality, regardless of the deceased’s or the beneficiaries’ domicile, residence, or nationality.
The applicable tax rates are determined by the relationship between the deceased and the heir:
- Spouse and direct descendants (children): 0%
- Partners in a civil union: 4%
- Siblings: 8%
- Uncles, aunts, nephews, nieces: 10%
- Other relatives: 13%
- Non-relatives: 16%
The Franco-Monegasque Tax Treaty: A significant treaty between France and Monaco (initially signed on April 1, 1950, and subsequently amended, notably on May 18, 1963) can influence inheritance tax, especially for French nationals residing in Monaco. Generally, real property located in Monaco is subject to Monegasque inheritance tax rules. In contrast, financial assets are typically taxed according to the deceased’s country of residence, with specific conditions applying to French residents who have lived in Monaco for over five years.
Gift tax regulations
Gift tax in Monaco applies to property located or based within the principality, irrespective of the donor’s domicile, residence, or nationality.
The gift tax rates mirror those of inheritance tax, based on the relationship between the donor and the recipient:
- Direct parent-child relationship or between spouses: 0%
- Between brothers and sisters: 8%
- Between uncles, aunts, nephews, and nieces: 10%
- Between other collateral relatives: 13%
- Between non-relatives: 16%
In Monaco, gifts must be formally registered through a notarized deed. Additionally, donations to recognized charitable organizations or to the Principality itself may be exempt from gift tax.
Absence of wealth tax (with an wxception)
Monaco does not impose a general wealth tax on its residents. This absence of wealth tax is a key factor in its appeal to affluent individuals.
French citizens residing in Monaco are an exception to this rule. Under the Franco-Monegasque Tax Treaty, they may be liable for French wealth tax on their real estate assets located in France.
