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Monegasque corporate income tax : Substantial reform of interest expenses deduction limitations

The Sovereign Ordinance n°7.334 dated 1 February 2019 substantially modifies interest deduction limitations applicable for Monegasque corporate income tax purposes, provided for by section 9-5 of the Sovereign Ordinance n°3.152 dated 19 March 1964.

Applicable to fiscal years open on 1 January 2019, the general limitations to 75% of net interest expenses exceeding 3 million euros is abolished and replaced by general limitations equal to the highest of 3 m€ or 30% of “tax” EBITDA and by specific limitations if the enterprise is deemed thin-capitalized.

 

This tax reform partially harmonizes Monegasque rules with French rules applicable to French corporate income tax, as amended by the French Finance Bill for 2019, as a result of BEPs to which Monaco as adhered in 2016.