Monaco Companies and Monaco Foundations

General Introductory and Offshore Tax Information

International business in Monaco has evolved into what it is today after a relatively slow start in the late 19th century. Banking in particular gained momentum in the 1970s after which a series of measures were implemented to diversify financial and corporate services in Monaco. Together with a range of Monaco offshore and onshore business entities, high-end professional and legal services and fund and portfolio management boosted Monaco image and economic development as an offshore jurisdiction and international business center.

An international business environment allows Monaco companies to conduct their operations either in or outside the jurisdiction. As a result, companies incorporated in Monaco can function as Monaco offshore and or onshore business entities depending on where their business interests are located. The fiscal regime for Monaco companies is neutral in that onshore and offshore companies are exposed to the same tax liabilities depending on source of income and the type of activity conducted. Plus, no specific structure is taxed differently as corporate tax is applied across the on all Monaco companies regardless of corporate structure.

Monaco company tax represents the only form of direct taxation and is applied at 33.3% on reducing profits. This tax is imposed on Monaco companies that earn over 25% of their profits offshore or are involved in commercial or industrial activity, as well as on Monaco patent and royalty business if conducted by a company or other legal entity. Patent and royalty business is however tax exempt if conducted by a physical person. Administrative offices are also exempt from corporate tax given that they are not engaged in any commercial or industrial activity, but are subject to an operating tax which is levied at 2.66 percent.

As an offshore jurisdiction with a friendly fiscal regime, Monaco has established a system to assist already established and newly incorporated Monaco companies. As such, companies are automatically entitled to a two year break from corporate tax for the first two years of operations, while for the third, fourth, fifth and sixth years after, corporate tax is levied at 25, 50, 75 and 100 percent respectively on reducing profits.

Monaco does not impose any withholding tax.

Monaco Offshore Business Entities:

• Monaco Limited Company and Partnership Limited by Shares
• Monaco Branch or Commercial Agency
• Monaco Commercial Agent
• Monaco General Partnership
• Monaco Limited Partnership
• Monaco Limited Liability Company
• Monaco Trust
• Monaco Foundation

Monaco Limited Company and Partnership Limited by Shares

Main Features:

• Monaco limited companies and partnerships limited by shares are regulated by the Sovereign Ordinance 1895, Ordinance no. 152, 1931, the Commercial Code and Acts nos. 408 and 767
• These Monaco offshore business entities can only be incorporated upon government approval which is issued by Ministerial Order
• Company statutes must be approved by government and notarized when being submitted by the applicant
• Monopolies and companies with special status are controlled by a special commissioner
• The minimum controlling share requirement for appointment as director was repealed under Act no. 1.331 in 2007
• Minimum of two directors and two shareholders
• At least one of directors must be resident of Monaco
• Directors must hold shares in the company
• Minimum share capital of one million French Francs
• Upon incorporation is liable to a stamp duty of 1% on share capital
• Must have a local office
• Must file audited accounts every year
• Can issue bearer shares but these must be deposited with the local representative or agent
• Companies formed outside or in Monaco may not continue in or out of Monaco; all companies must be newly formed Monaco entities

Monaco Branch or Commercial Agency

Main Features:

• Authorization to operate as a branch in Monaco must be obtained by the foreign company
• The documents needed to be submitted to open a branch include audited accounts for the past three years, formation documents, business statement, proof of sufficient financing for business project and proof of office space
• Licenses are normally valid for a period of up to three years
• Monaco branches are usually established by foreign banks

Monaco Commercial Agent

Main Features:

• Monaco commercial agents are regulated by Act No. 4, 1978
• Usually operate independently and are not tied to an employment contract
• Primary activity of negotiating and eventually concluding sales, purchases and the provision of services on behalf of producers, manufacturers and traders.
• May represent more than one business partner
• May provide own separate set of services
• May provide agent services for a specified or unspecified period of time
• May operate on an exclusivity contract or on consignment

Monaco General Partnership

Main Features:

• Has features similar to those partnerships formed in common law jurisdictions
• Minimum of two members who pursue common business goals
• A copy of the partnership’s statutes is published in the Monaco Newspaper
• General partners are responsible for all obligations and liabilities
• One or more partners may be specified as signatories in the partnership’s constitution
• Constitution must be registered with the Department of Fiscal Services
• Interests of each partner are denominated in parts
• Formed by signing of Articles of Association
• Generally operates like a company

Monaco Limited Partnership

Main Features:

• This company has features similar to those of the Anglo-Saxon Limited Partnership
• Has a minimum of one general partner who assumes unlimited liability
• Has a minimum of one limited partner whose liability is limited to the contribution made to the company’s capital

Monaco Limited Liability Company

Main Features:

• Formed by two or more individuals whose liability is limited to their contribution
• Businesses may only be structured as limited liability companies if engaged in commercial activities
• The name of one or more members can be used as or as part of the company’s name
• The Monaco company name must end with the expression ‘limited’ or ‘SARL’.
• May be managed by one or more directors whether paid or voluntary, members or not members
• May not be managed by another legal entity
• Minimum capital requirement of 15,000 euros
• Capital may include contributions in kind, which must be issued upon incorporation, or may constitute an amount at least equal to the minimum capital requirements ; unpaid shares must be paid within three years counted from the date of registration

Monaco Trust

Main Features:

• Monaco trusts were established under Law No.214, 1936
• Monaco trusts can be setup by any individual who qualifies to do so
• A trust must be established by deed consistent with the provisions of the law of the jurisdiction under which the trust property exists
• Only the persons approved by the First President of the Court of Appeal may act as trustees for Monaco trusts
• Trusts may be managed from Monaco but do not have to be registered there
• The settlor of a trust must reside in Monaco
• The trust deed must be filed with the relevant authority in Monaco

Monaco Foundation

Main Features:

• Has separate legal personality from the people who form the foundation; founder, council, beneficiaries etc.
• Foundation can be perpetual or have a limited duration
• Foundations may be formed for any purpose as long as it is not contrary to legal norms and within the best interest of society
• May be established by Will
• Foundations are generally created through a Will, but if established inter vivos are required to be established by notarial deed
• Forced heirship rule applies and thus cannot be used by foreign nationals o avoid this law
• Persons administering the foundation must have resided in Monaco for a minimum of one year or be a citizen of Monaco