Monaco

However, for wealthy individuals and corporations, Monaco is all about the benefits of an appropriately shaped tax system, which by their sheer scale eclipse any tourist appeal of this principality.

The Principality’s authorities have developed a coherent and original concept to create a favourable legal environment for wealthy individuals and financial institutions in Monaco. On the one hand, Prince Albert II’s plans consist of the immense privileges granted to Monaco’s tax residents and, on the other, the care taken to ensure that residents operate to high standards and avoid situations that could jeopardise the Prince’s reputation.

For those who make it through the selection process, the country offers great opportunities – Monaco is the only country (apart from Andorra) in Europe where individuals are not taxed on income at all; the scope and rigour of banking secrecy offered in the principality beats anything Swiss banks (not to mention Polish ones) can offer their clients; Monaco is one of three countries in the world included by the OECD on a ‘black list’ of countries that do not cooperate with the tax administrations of other countries.

Monaco also provides a very high level of legal security that cannot be found in island states with favourable tax regimes scattered across the Caribbean Sea, Pacific and Indian Ocean. The Grimaldi dynasty has ruled here since as far back as 1419, a time when Władysław Jagiełło reigned in Poland. The Grimaldi’s stable rule survived the Reformation, the Thirty Years’ War, the French Revolution and two world wars (despite losing 90% of its territory in 1847, never to be regained again). Today, the principality is partially integrated into the structures of the European Union (thanks in part to a customs union with France and the use of the euro as its official currency), but retains a sufficient degree of independence to protect the personal freedom of its residents and to maintain discretion around their interests.

Monaco is known for the fact that income tax was abolished here in 1809. (It was reintroduced in 1957 but only for French citizens resident in Monaco). The tax benefits provided by Monaco are enjoyed by the likes of Roger Moore, Ringo Starr and Eva Herzigova.

For those who choose to place their money here, Monaco offers great opportunities for private banking and wealth management. Local financial institutions are not only renowned for their discretion, but also specialise in creating customised investment products aimed at wealthy, discerning clients. A total of €80 billion has been deposited in banking and investment accounts in the Principality, largely (around 50%) consisting of private money of individuals who are looking for opportunities in Monte Carlo to manage their wealth in a stable and secure way.

Given that Monaco is the second smallest country in the world, obtaining a flat here is not a cheap venture. For a studio apartment in Monaco you will pay between €280,000 and €1,450,000, and for a three-room flat around €485,000-7,000,000.

On the other hand, such a flat can also be a stable capital investment – over the decade 1996-2005, real estate prices in Monaco grew by an average of 10 per cent per year.

The business of corporate administration is not subject to income tax in Monaco, but only to a fee of 2.66 per cent of the expenses incurred in running an office in Monaco. It is therefore a very good idea to set up a company in Monaco for the administration of the corporate structure, with a subsidiary company, registered in a country with very low corporate tax, retaining the income and further subsidiaries to carry out the operational activities.

Registering a company in Monaco not only ensures tax efficiency, but also a high level of discretion. The local authorities collect the minimum necessary information on companies registered in Monaco and are not willing to share this data with other authorities and entities until such a company gives very serious reasons for doing so.

Monaco has a very good legislative and political climate for entities engaged in investment activities, including asset management in particular. Therefore, the principality is an excellent jurisdiction for setting up private investment fund management companies – they do not pay any income tax. The combination of a management company registered in Monaco and a fund registered in a jurisdiction where the fund’s profits are tax-free makes it possible to create a structure that is as tax-efficient as possible.

In line with Prince Albert II’s policy of maintaining the elite nature of the principality, it takes between four and nine months to register a company in Monaco (including no more than six months from application) and there is no agreement on the part of the Prince’s administration to sell ‘ready-made’ companies to outside investors.

Monaco has concluded Tax Information Exchange Agreements (TIEAs) with Andorra, Argentina, Australia, Austria, Bahamas, Belgium, Denmark, Faroe Islands, Finland, Germany, Greenland, Iceland, Liechtenstein, Netherlands, Norway, Samoa, San Marino, Sweden, United States (as at 10 November 2010).

In addition, Monaco is party to double taxation agreements with France and Luxembourg (as at November 2010).

Individual countries with favourable tax systems

Bank accounts