By Uglobal Staff
Never mind the sun, the sea, and the celebrities: there’s one big reason that people move to Monaco.
“Oh, not paying any tax,” says Richard MacLellan, managing director of EBC Corporation, a Monaco company that advises high net worth individuals. “It’s coming somewhere where there’s no tax, no recording and they don’t need to file tax returns.”
Monaco isn’t an entirely tax-free jurisdiction: residents can expect to pay about 20 percent in VAT on all the goods and services they buy, and French nationals must also continue to pay their regular taxes to the French government.
Still, says Ekaterina Mavrenkova, managing partner of Henley & Partners Switzerland, there are obvious tax benefits to relocating to Monaco.
“Monaco offers many advantages, including no taxation of income or capital gains for non-French residents, no double taxation agreements and high confidentiality,” she says.
Europeans tend to be drawn to Monaco chiefly for tax reasons, while non-EU citizens are often more attracted by the lifestyle and easy access to the rest of Europe.
“You could go to the Bahamas, or some Caribbean island, but here in Monaco you’ve got Europe on your doorstep,” MacLellan says.
Monaco’s reputation as a tax haven has led some countries to seek to deter their citizens from relocating. A recent crackdown on tax exiles led many of Monaco’s Russian residents to head home, MacLellan says, while a change in the UK’s tax residency rules largely ended the once-widespread practice of financiers living in Monaco and commuting to the city of London by private jet.
Despite such efforts, though, Monaco remains a popular playground for Europe’s moneyed classes, and especially the French, Italian and English elite.
“For English-speaking people, it’s wonderful, because English is very widely spoken,” says Caroline Olds-Gabison, the managing director of Caroline Olds Real Estate. “You feel like you’re in England here most of the time.”
The tax perks are an unquestionable draw, but there are plenty of other reasons to love Monaco, Olds-Gabison adds.
“It’s got beautiful weather, good infrastructure, good schools,” she says. “Most of the people who live here could live anywhere, but they choose to live here.”
Historically, Monaco was chiefly a retirement spot; now, though, it’s attracting growing numbers of young entrepreneurs and professionals, many of whom continue to run their businesses while in Monaco.
“The people are coming in younger, in my mind, than they were 20 years ago,” says Peter Brigham, a director with financial consultancy Rosemont Monaco. “People used to come to retire in Monaco, and that’s not necessarily the case nowadays.”
Gaining residency in Monaco is relatively straightforward, as long as applicants have the means to support themselves in a country where one in three residents are millionaires. The application fees for residency are nominal — just 10 euros — and the only real requirements, besides a police background check, are a suitable place to live, and a letter from a Monaco bank certifying that the bearer has at least 500,000 euros in their account.
The bank deposit isn’t an investment, but simply evidence that applicants have the cash to live comfortably in Monaco, Brigham says. “There are certain criteria to meet, but you aren’t buying your residency,” he explains. “It’s an expensive place to live, so you need to have reasonable resources.”
The proof of accommodation isn’t intended to spur investments either: rental properties are perfectly acceptable, as long as they’re big enough for the applicant’s family. Apartments aren’t difficult to find, but Monaco is one of the world’s most expensive real-estate markets, so the cost of housing can be startling even for HNWIs.
“People have to compromise quite a bit, but they do find things,” says Olds-Gabison. “It’s expensive, and things are smaller than what they’re used to.”
Obtaining a bank letter is relatively straightforward, although banks have less discretion in the matter than they used to. The 500,000-euro minimum was formalized this summer, and banks now also routinely ask applicants for several years’ worth of tax returns as part of their due diligence, “just in case you’ve forgotten to pay your taxes,” MacLellan says.
New arrivals aren’t likely to run into tax trouble with Monegasque authorities, but should be mindful of how moving to a low-tax jurisdiction will be viewed by their countries of origin, says Brigham. Monaco doesn’t have many tax treaties, and new residents could easily find themselves facing tax bills in their home countries, he warns.
“You have to be slightly careful,” he says. “You need to do pre-move planning.”
Successful applicants face an eight to 12-week wait before receiving a residency card that’s valid for a year. The card can be renewed three times, as long as residents spend a minimum of 90 days in Monaco each year; after that, residents can switch onto a two-year residency card for a further three renewals. Residents who remain in good standing after nine years can then transfer onto a 10-year residency visa, but maintaining the longer-term visa requires residency in Monaco for at least six months of every year.
After 10 years, residents can apply for citizenship, but there are no guarantees, and relatively few residents ultimately make the transition.
“The Prince of Monaco makes the final decision as to whether one is accepted,” explains Mavrenkova. “Typically, only those who have provided exceptional benefits to the Principality of Monaco in fields such as economy, art, culture, science, etc., will be granted citizenship.”
With or without a Monegasque passport, though, Olds-Gabison says she sees plenty of new arrivals putting down permanent roots in Monaco. The lifestyle and the low-tax, low-stress environment quickly grow on you, she says.
“It’s very, very comfortable,” she says. “There’s a bit of bureaucracy in the beginning, but once you’re over that it’s a fabulous place to live.”