Despite the common belief Monaco is not an offshore jurisdiction. Having a business in the Principality involves various taxation obligations as well. Luckily Monaco’s tax regime is built on some extremely supportive pillars.
The Principality’s main source of income is the value added tax (VAT), which is paid on goods and services in the usual way. The main attribute of Monaco’s fiscal policies is the total absence of direct taxation for Monégasque residents as there is no income tax, capital gains tax or wealth tax.
As a new business owner you have the possibility to start and build up your business without interfering with any taxation issues. During the first two years of business operation your company is tax free, which can highly support the establishment and improvement of your business.
After three years you will be due to pay tax, but not based on your income. In the Principality of Monaco the corporate taxation is mainly based on revenue. Therefore you only pay tax if you are able to gain profit from your business activity.
Without any doubt Monaco’s taxation is very attractive for businesses comparing its profit based taxation method to most of the income based taxations offered by other countries.
Monaco also offers anonymous taxation. If you are investing in Monaco and you are not maintaining a residency there, since you are not staying for more than six months a year, you are probably obliged to pay tax based on your actual residency.
In Monaco you will find banks that are ready to help you in the taxation issues without disclosing your actual wealth held in the Principality to your country of origin. The name of the solution is Taxation of Saving Income.
The Taxation of Saving Income is a European directive, which introduced a withholding scheme as an alternative to the exchange information. This withholding tax has been applied in Monaco since 1st July 2005, in accordance with a convention between the Principality of Monaco and the European Community. The revenue from this withholding tax is paid every year.