Monaco Reforms Property Tax Law

by Ulrika Lomas, Tax-News.com, Brussels

07 July 2011

Determined to ensure greater equity in its property tax provisions, to boost the attractiveness of the country as a location, and to encourage property investment, Monaco has passed a new law amending the taxation on the transfer and purchase of real estate.

The new law provides crucially for a substantial reduction from 7.5% (6.5% registration tax plus 1% tax on the registration of a mortgage) to 4.5% of the registration tax levied on individuals electing to purchase a property in Monaco either directly or indirectly, via a registered Monaco SCI (property company) or similar “civil” companies, where shareholders’ identities are disclosed to the tax authorities. The 4.5% reduced rate is, however, dependent on the circumstances of the transaction.

The existing 7.5% rate will continue to apply to purchases by 'offshore' entities. In addition, the new law provides that the transfer of beneficial ownership in an offshore entity that owns real estate in Monaco will be subject to registration tax at 4.5%, based on the market value of the property. Previously, such transfers have been exempt from taxation.

Other measures contained in the new tax law provide for certain disclosure requirements by offshore entities in Monaco, as well as for penalties imposed for late filing and for failure to appoint an authorised representative.

Transitional provisions are set to apply for one year following the passing of the new law, whereby any real estate that is transferred from an offshore entity to the requisite Monaco entity, such as an SCI or to an individual will be subject to registration tax of 1%, subject to certain conditions.

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