Monaco has long been considered a tax haven due to its favorable tax laws and policies. Monaco law doesn’t impose an income tax on individuals acting within their private activities. Also, there is no wealth tax and capital gains tax for people, and no local taxes. So several people choose to call this jurisdiction home because it’s a high-profile tax haven.
Although Monaco doesn’t tax individuals on their income and corporations which make most of their profits within the country tax-exempt, there are some important taxes imposed on real estate.
Tax on the purchase and ownership of property in Monaco
In Monaco, property registration, title registration, and notary fees together are taxed at 6% if the property is purchased by a person or a Monaco company owned by physical persons. But if the property is purchased by other types of companies or by foreign companies, it will be taxed at 9%.
Taxes associated with the purchase of real estate in Monaco
For new construction or new build properties in Monaco, 20% VAT is due instead of registration tax. Generally, the sale of a building plot and a new building by a taxable person acting as such, are subject to 20% VAT.
But the sales of old buildings and land are exempt from VAT. The seller may choose to elect VAT on exempt transactions under specific conditions.
Also, if these transactions are carried out by a non-VAT taxable person, they remain outside the scope of VAT, and an election for VAT is not available.
Monaco Investment vehicle in real estate and the taxes related to it
The Monegasque SCP – Société civile particulière (Monaco non-trading civil company) .
Monegasque SCP is a non-commercial institution that enjoys several tax benefits due to a special tax regime in Monaco. The SCP can buy and rent real estate, it is also well suited for the development of property assets for private and family needs.
Taxes that apply on a real estate property in Monaco
- Transfer Duty
In Monaco, registration duties (e.g, transfer tax) are charged upon transfer of ownership of Monégasque real property.
Shares transfers of companies (Monégasque SCP) owning properties in Monaco are subject to a 4.5% tax, but 7.5% on the market value for any other purchaser.
- Tax on the acquisition of shares in a company owning real estate in Monaco
Acquisition of shares in a Monegasque SCP owning real estate in Monaco incurs a 4.5% tax on the share price if the purchaser is a private person or a qualifying Monegasque SCP, but 7.5% on the share price for other purchaser.
- Capital gain taxation on disposal of real estate or shares in a company owning real estate in Monaco
There is no capital gain taxation for individuals Monegasque tax residents. And no withholding tax on the sale carried out by a foreign company or an individual that is not a tax resident of Monaco. But capital gains are taxed on a sale carried out by a Monegasque resident company subject to corporate income tax in Monaco.
If you are planning to purchase a real estate property in Monaco, note that due diligence must be carried out. These generally include municipal search, utility search, land registry search, company search, survey/valuation, and phase one environmental survey. This due diligence is important to the overall success of the transaction. In order to avoid undue difficulty, it’s best to let a professional handle all these. But fret not, your Damalion expert can assist.
Are you planning to buy a property or set up your investment company in Monaco? – Let’s go ahead and contact your Damalion expert now and let us help.
