A gleaming land with no poverty: Why Monaco has become a tax paradise for the ultra-wealthy A synonym of luxury and royal splendor, the tiny state of Monaco associated with France is attracting more and more wealthy people to its tax haven. Among them are businesspeople, art dealers, athletes, celebrities and, of course, carefree heirs to six-figure sums. Today some two thousand millionaires and billionaires call Monte Carlo home. Monaco’s freshest arrival is Sir James Arthur Ratcliffe, the British financier, industrialist, and founder of the Ineos chemicals group, who moved here through Discus Holdings in August. This news is significant also because, in May 2018, Ratcliffe with his 28.5 billion dollars had topped the list of the richest British tax residents according to the Sunday Times.   The Principality as a magnet for millionaires Discus Holdings experts forecast that by 2026, Monaco will be home to over 3000 millionaires. At present, besides the newly-arrived Ratcliffe, Monaco counts as residents Tina Green, wife of Arcadia Group (Topshop) owner Philip Green, Tatiana Casiraghi (née Santo Domingo), wife of Prince Andrea and heiress to a Colombian brewing empire worth 2.5 billion dollars; modern-art dealers David and Ezra Nahmad with three billion dollars between them, and Lily Safra, the Brazilian socialite and philanthropist whose wealth is estimated at 1.3 billion dollars. Here are also easyJet founder Stelios Haji-Ioannou, 86-year-old ex-Chelsea owner Ken Bates, Formula-1 luminaries Lewis Hamilton and Jenson Button, and Serbian tennis player Novak Djokovic. All these names are, however, only the start of a very impressive list. Surrounded on three sides by France, the sovereign state of Monaco has been in a customs union with France since 1865. This union was however suspended in 1962, when Prince Rainier III refused to make the changes to Monaco’s tax system that Charles de Gaulle wanted. The tax blockade that France instituted on the border with Monaco – an episode that served as the basis of the film Grace of Monaco with Nicole Kidman and Tim Roth – led to the two countries signing in 1963 an agreement under which French citizens residing in Monaco would be taxed. This new convention required that French citizens in Monaco pay the French income tax. However, it did not apply to the native inhabitants of Monaco, companies where the share of Monaco capital was over 25%, and French who had lived in Monaco for at least five years. As can be seen, the agreement that has been in force so far does not affect citizens of other countries. This has made Monaco a magnet for British, Italian, and German multimillionaires who seek to minimize the taxes on their profits, while at the same time living in familiar continental Europe.   Taxes in Monaco: what there is and what there is not Since 2001, Monaco’s official currency has been the euro, which makes life for anyone moving here no different than in, say, Nice right next door. Different however are several aspects of taxation, but these features are quite welcome. Thus, Monaco has no income taxes, and the tax on inheritance is as light as can be. The latter point is especially important for families which increase their wealth from one generation to another and wish to pass it on to their descendants without unnecessary losses. Children, parents, and spouses in Monaco are fully freed from tax on inheritance and gifts, while the rate for other relatives is very gentle at 8–16% (depending on the degree of kinship). When purchasing real estate in the Principality, one must pay a registration tax of 4.5%. The tax on profits from commercial activity here is set at 33.33%, though businesspeople who do 75% of their financial operations within Monaco do not have to pay anything at all. Monaco offers one other very important business advantage: guaranteed banking secrecy. Although since 1994 there has been an agreement with France that requires Monaco to disclose suspicious accounts, this does not happen very often. Also, in 2016 Monaco and the EU signed a joint document on tax transparency with the goal of “establishing conditions for detecting and prosecuting tax evaders”. Has anything changed for tax residents of Monaco? Almost nothing has really, though probably some tax residents got worried.   Portier Cove — an environmentally-friendly area for new citizens As a country with the highest population density, Monaco is experiencing serious problems in its real-estate market. The Principality’s land area of 2.2 square kilometers (less than New York’s Central Park) simply does not have the space to meet the high demands of its ultra-wealthy residents. Monaco, still the second-smallest country in the world, has already stretched its capacity for new construction to the limit. The villas on the hillsides, skyscrapers, and even underground structures are proof of this. Prince Albert II, desiring to meet the demands of all of Monaco’s super-wealthy residents, has agreed to an ambitious melioration project. The government oversees the project, while the construction is funded in the amount of 2.3 billion dollars by private investors, who expect to (and certainly will) receive a margin on the sale of the properties. Portier Cove is the name given to this neighborhood which is expected to add 15 acres to Monaco already by 2026. It will include a marina spacious enough for thirty vessels, a landscaped park, and luxury residential buildings (120 are planned). In order to build this, watertight chambers will be set on the seabed, then a portion of the territory will be drained and filled with sand imported from Sicily in order to create an artificial relief. Considering the scale of this endeavor, certain environmental risks must be overcome. This problem, however, will be solved by Bouygues, the French industrial group behind the project, using modern technologies. This includes a 3D printer that can print coral reefs, maintaining the existing marine biodiversity to the highest degree. It must be mentioned that such terrain melioration projects are nothing new for Monaco. The Principality has already expanded its territory by 20% since 1861, though now even the sea must yield to its plans. The unique challenge that Portier Cove faces is that the new development must meet the HQE Aménagement certification for sustainable urban development, which is tightly bound with the environmental side of the project.   A land of bankers and the wealthy There is no doubt that Portier Cove, which will be located next to the Monte Carlo casino, one of the oldest in Europe, is vital for the Principality to continue flourishing in the future. After all, even the “environmentally-friendly” Prince Albert, who rides an electric vehicle and has donated millions to environmental goals, admits that this expansion of Monaco’s territory, even with its risks, is needed. Strikingly, only 70 of the apartments in the new buildings (some of them designed by Renzo Piano, founder of the high-tech style in architecture) will be offered for sale. The building company has decided to hold on to most of them. This seems completely reasonable, for who knows how much prices will soar in Monaco’s real estate market by 2026, if there is already almost no supply left now while demand is huge. According to an Oxfam report compiled in 2017, eight large EU banks, including the five largest French banks, are actively operating in Monaco. This makes for over 2000 employees, i.e. over one thousand bankers per square kilometer, and within a territory of 40,000 people. This is a state of affairs that is frankly unique. The banking employees here, the experts write, are mainly involved in capital management. That is, they mainly provide consulting to millionaires and billionaires on ways to boost their income through promising investments.   Or perhaps it is all about the lifestyle? Yet one cannot claim that wealthy people move to Monaco purely for tax reasons. Naturally, each of them wishes to optimize their incomes and lower their financial risks, but is that all? No, it clearly is not. The world’s major players love Monaco for the standard (and even style) of living that this country holds in store for them. A gentle climate with sun year-round, yachting as a national sport, and global events virtually every day are reasons why millionaires are heading for Monte Carlo. Consider these curious figures: up to twenty superyachts can moor in Port Hercules at the same time, while the average daily mooring costs for such yachts is 2000 dollars (during the Grand Prix season, the price can just up to 20,000 dollars/day). From the Nice airport it is easy to reach anywhere on the globe, which will win over businesspeople whose work demands frequent travel. To get from point A to point B here, however, often personal helicopters are used. Discus Holdings’ Senior Vice-President, Mr. Milan Cimbolinec, who has also resided in Monaco for the last seven years, says that such close links with Europe are a reason why affluent people choose precisely Monaco over other tax havens such as the Cayman Islands or Puerto Rico. Mr. Cimbolinec points to one more reason why Monaco has become a location attracting the ultra-wealthy: it is all about security. “In Monaco you can stroll around wearing an expensive watch or jewelry and you do not have to worry about anything. Wealthy people are used to having personal security staff around them, but the beauty of Monaco is that that is really not necessary.”

« RETURN TO ALL NEWS

---