Bill No. 1116 establishing the Initial General Budget for the 2026 fiscal year was tabled in public session and referred to the Commission on October 2, 2025. In view of the evolution of revenues and expenses, the 2026 Initial Budget shows a projected revenue surplus of €8.8 million. For the record, the 2024 financial year closed with a surplus of €192.7 million, while the 2025 Amended Budget shows a revenue surplus of €86 million. The 2026 budget forecasts revenues of €2.217 billion, up +5.7% (or +€118.6 million) compared to the 2025 Initial Budget (€2.098 billion) and expenditure forecasts of €2.208 billion, a slight increase compared to those in the 2025 Initial Budget (€2.187 billion, or +1%, or +€21.3 million). The main guidelines of this 2026 Preliminary Budget are as follows: Revenues for 2026 will increase by €118.6 million (+5.7%), driven by tax contributions (+€136.8 million), while state property revenues will decrease by €19.3 million (-4%). Despite this increase, they remain lower than in 2024 (–€107.7 million) and in the 2025 Amended Budget (–€272.7 million). Operating expenses increased by €41.7 million (+5%). On the other hand, investments fell by €56 million (-6.6%), particularly in acquisitions, the NCHPG, the CTVD and the Ilot Pasteur and Socle Charles III operations, while certain expenditures increased, such as the Villa Sauber (+€18.5 million), the Stade Louis II (+€23.1 million) and the National Housing Plan (+€48 million). In addition, the following actions are being pursued as part of the 2026 Preliminary Budget: Supporting the rollout of other major infrastructure projects, such as the renovation/reconstruction of Cap Fleuri and the renovation of public buildings; Continuing to strengthen resources for pedestrian mobility and digital transition; Supporting the Principality's attractiveness with the restructuring of Place des Moulins and the creation of a new operation dedicated to maintaining the Fontvieille Shopping Center. Finally, actions in the areas of social, cultural, sports, education, and quality of life continue to be supported in the 2026 Initial Budget by the State Budget.   Official source: https://www.conseil-national.mc/2025/10/01/n1116-projet-de-loi-portant-fixation-du-budget-general-primitif-de-lexercice-2026/

Sovereign Ordinance No. 11.486 of 18 September 2025, published in the Journal de Monaco on 26 September 2025, implements Law No. 1.573 of 8 April 2025 on the modernization of company law. It regulates the transfer of acts performed on behalf of a company in formation. For commercial companies other than joint stock companies, the acts are appended to the articles of association and automatically transferred after registration, or may be signed by certain partners or the manager under a mandate. For public limited companies and limited partnerships with share capital, these acts are submitted to the constituent meeting, which may also appoint the first directors. After registration, any takeover requires a decision by the partners, unless otherwise provided for in the articles of association. For joint stock companies, the Ordinance sets out the content of the extract from the articles of association, provides for the publication of the choice of management method by the board of directors and imposes technical means to ensure the identification and participation of directors in the event of a videoconference. It defines the rules for convening, holding and recording general meetings of shareholders, specifying the mandatory information to be included in the notice of meeting, the minutes and the attendance sheet, the possibility of electronic signatures, and the procedures for representation by proxy. It determines the deadlines for the submission of draft resolutions, the communication of corporate documents prior to the meeting, the transmission of written questions and the deadlines for responses, and organizes the procedure for amending the articles of association, in particular by declaration to the Minister of State and publication in the Journal de Monaco. With regard to the public offering of financial securities or the admission of financial securities to trading on a foreign regulated market, which is subject to prior authorization by the Minister of State, the Ordinance stipulates that the application for authorization must contain the same information and documents as those that the public limited company must submit to the stock market authorities of the market concerned. With regard to the conciliation procedure, the application for conciliation must be accompanied by the registration extract, the statement of claims and debts, the securities, the annual accounts and the financial tables for the last three financial years, specifying, where applicable, the date of cessation of payments and the identity of the proposed conciliator. The Ordinance also regulates the time limits for the manager to respond to written questions and the procedures for their transmission prior to general meetings. The provisions of this Ordinance enter into force on 30 September 2025. https://journaldemonaco.gouv.mc/Journaux/2025/Journal-8766/Ordonnance-Souveraine-n-11.486-du-18-septembre-2025-portant-application-de-la-loi-n-1.573-du-8-avril-2025-relative-a-la-modernisation-du-droit-des-societes

The bill amending various provisions relating to chartered accountancy, statutory auditing and corporate accounts was submitted to the General Secretariat of the National Council and registered by the latter on 25 July 2025 under number 1.112. The role of statutory auditor within Monegasque companies is one of the pillars of corporate governance. Changes in corporate practices and new requirements in terms of transparency and accountability now necessitate a targeted review of this system. This bill aims to modernise the profession of chartered accountant and certified public accountant, as well as the functions of statutory auditor and contribution auditor, following the passing of Law No. 1.573 of 8 April 2025 on the modernisation of company law, of which it constitutes an operational and thematic extension. The Prince's Government emphasised its desire to enhance the transparency, accountability and attractiveness of the legal framework applicable to Monegasque companies. The bill thus aims to complete the reform initiated by focusing on the effectiveness of statutory audits, the protection of shareholders and the strengthening of third-party confidence. This text provides in particular for: - strengthening the conditions for access to and practice of the profession of chartered accountant, integrating the profession of certified accountant into that of chartered accountant and redefining their responsibilities; - supplementing the rules on incompatibilities applicable to contribution auditors and statutory  auditors; -    adapting the system of criminal penalties in order to ensure a fair balance between the effectiveness of account auditing obligations and the constraints on businesses; - introduce the concept of a ‘public interest entity’ and allow for a term of office extended to twenty-four fiscal years for auditors of such entities in order to ensure stability of control; - to establish the obligation for certain companies known as ‘parent companies’ to prepare and file consolidated accounts. This would apply to public limited companies or limited partnerships with share capital that carry out commercial activities, as well as commercial companies, provided that they exercise exclusive or joint control over one or more legal persons or entities. This reform will provide a coherent legal framework adapted to the contemporary international challenges facing the accounting profession and the functions of statutory auditors and contribution auditors, thereby strengthening legal certainty for companies, third parties and accounting professionals. https://www.conseil-national.mc/2025/08/08/n1112-projet-de-loi-portant-modification-de-diverses-dispositions-relatives-a-lexpertise-comptable-au-commissariat-aux-comptes-et-aux-comptes-sociaux/

The law proposal on trusts was submitted to the General Secretariat of the Conseil National and registered by the latter on 10 June 2025 under number 269. A trust is a transfer of ownership limited in substance and duration, which has various interests that distinguish it from other legal arrangements: - a management trust, which allows a professional manager to be entrusted with a number of assets of different kinds in order to benefit from their expertise and management resources for the benefit of the settlor or beneficiaries; - security trusts, which allow the settlor to grant the creditor a security interest in the assets transferred to them and to strengthen their control over the repayment of their debt. In Monaco, in 2010, a law proposal (n° 197) envisaged the "creation of trusts under Monegasque law" and in 2012 a draft law proposed an alternative to the "security trust" with a view to enriching Monegasque law with a "security ownership agreement". Neither of these projects came to fruition, but they inspired the drafting of this law proposal. This law proposal will enable Monegasque law to be adapted to developments in business practice in order to enrich the wealth engineering options that Monaco can offer with trust management and to strengthen Monegasque law on securities and companies in difficulty through the use of security trusts. The law proposal n° 269 aims to establish trusts as a new legal instrument for asset management in Monegasque law. The law proposal comprises eight chapters and forty-four articles. https://www.conseil-national.mc/2025/06/10/n269-proposition-de-loi-relative-a-la-fiducie/    

The law proposal on the Monegasque Patrimonial Foundation was submitted to the General Secretariat of the Conseil National and registered by the latter on 10 June 2025 under number 268 and adopted in public session on 18 June 2025. Monegasque foundation law has lagged behind developments in other European countries, such as Switzerland, Liechtenstein and the Netherlands.   However, legal instruments of this type are essential to meet the asset structuring needs of a significant proportion of Monegasque residents, particularly High Net Worth Individuals (HNWIs). These individuals are seeking the most effective solutions to protect high-value assets such as real estate, works of art and family property, to transfer company shares, or to guarantee the integrity of their estate in the event of inheritance or family disputes.   The patrimonial foundation could enable better management of copyright or even anticipate the future use of an art collection by specifying in its constitution that these assets must remain within the immediate family or be made accessible to the public in the form of loans to museums, for example.   This law proposal provides for the creation of a new type of foundation, in order to provide Monegasque law with an innovative wealth engineering tool.   This law proposal will allow for the creation of a legal entity under Monegasque law intended to manage assets primarily for the benefit of the founder's family members. It may consist of real estate or movable property, such as shares in companies, but also intangible rights such as copyright.   Upon its establishment, the foundation must be endowed with a sum of not less than €10,000,000. In addition, the endowment may be made in kind. Furthermore, the Monegasque patrimonial foundation is intended exclusively for persons with a genuine link to Monaco, as the founder and the majority of the administrators must be domiciled there.   Among the measures provided for in the law proposal are the obligation to register the foundation in the special register kept by the Trade and Industry Register, to declare the identity of the beneficiaries and to register them in the register of beneficial owners (companies and economic interest groups), and to appoint a person responsible for basic information about the foundation and its beneficiaries.   https://www.conseil-national.mc/2025/06/18/n268-proposition-de-loi-relative-a-la-fondation-patrimoniale-monegasque/

In a letter dated 28 May 2025, the Prince's Government informed the President of the National Council that it had given its approval for transforming Bill No. 262 on the Time Savings Account ("Compte Epargne Temps", or "CET") into a draft law. This text extends the CET regime, which was introduced into Monaco's labor law by Law No. 1505 of June 24th, 2021. This law relates to concerted working time arrangements over a reference period longer than one week. The objective is to furnish all employees with a flexible time management instrument, enabling them to accrue entitlements to remunerated leave. The CET may be credited with annual paid leave days exceeding the 24-day threshold, seniority leave, collective agreement leave entitlements, overtime rest days or monetary equivalents. The CET also offers companies a distinct advantage by supporting greater flexibility in working time arrangements. It is particularly beneficial in ensuring a more effective alignment between the scheduling of leave and fluctuations in business activity, as it prevents unused leave days from being lost at the end of a period. Any unused leave days can be taken at a later date when workloads are lower. In addition, it functions as a method of employee retention. The CET can be established through a collective bargaining agreement or, failing that, by a decision of the employer after consultation with trade union delegates or staff representatives. The general operating procedures of the CET, the conditions of its funding, any potential employer contribution, and the terms of its use will be determined by the collective agreement or the employer's decision. In the event of termination of the employment contract, the employee is entitled to an indemnity payment. This payment is equivalent to the number of days accumulated in the CET, unless there is a provision in the collective agreement or in the employer's decision to the contrary. The value of the day is assessed on the date of payment. The draft law is to be submitted to the National Council no later than 5 June 2026.

Bill No. 1108, submitted by the Monaco Government on April 30th, 2025, introduces a new method for the termination of permanent employment contracts in Monaco.   This text represents a significant change in Monegasque labour law, introducing a method of amicable separation between employee and employer.   Termination by mutual agreement between employee and employer. Initiative belonging to both employer and employee. Cannot be imposed by either party. Freedom of consent strictly protected. Significant latitude for negotiating on the terms and conditions of contract termination, within the limits of the procedural rules laid down.   Calculation of statutory minimum entitlement: Less than 2 years' seniority corresponds to one quarter of a month's salary per year of seniority. After 2 years of seniority, compensation must be at least equal to the severance pay so called “indemnité de congédiement”.   There is a withdrawal period of 15 calendar days for both parties. Approval by the labour inspectorate must be granted within 15 working days. If there is no answer, the agreement is deemed approved. However, for protected employees, if there is no answer, it is deemed refused.   Once approved, the law will come into force subject to an agreement with France, to enable employees working in Monaco to entitle from unemployment benefits in their country of residence, in the event of recourse to the Monegasque system of mutual termination agreement of employment contracts.   There are advantages for the employer to remedy to the mutual termination rather than the dismissal provided for by article 6 of law No.729. There is a very limited risk of litigation. Severance pay may be lower. There is the possibility to resolve a deadlock situation when recourse to article 6 is restricted – either by custom or agreement or when the employee benefits from specific protection.  

Monaco, April 2025 – The Princely Government has reaffirmed its support for entrepreneurship with the adoption of Ministerial Decree No. 2025-179, dated April 8, 2025, and effective since its publication on April 11. This updated regulation modernizes the framework for professional establishment aid and business support measures in the Principality. A Modernized Support System This new decree replaces the former Ministerial Decree No. 2004-261, introducing significant improvements to better respond to today’s entrepreneurial needs: Clearer eligibility criteria: Aid is now available to individuals of Monegasque nationality and their spouses or partners. Extended support duration: Financial aid is granted for an initial period of one (1) year, renewable upon request for an additional two (2) years. Increased rent assistance: The monthly cap for rent support has been raised to €900, easing the financial burden of business setup. Retention of loan subsidy programs: Businesses established in Monaco for less than five years remain eligible for professional loan subsidies. Crisis-ready measures: Aid mechanisms introduced during the COVID-19 pandemic have now been generalized for any officially recognized epidemic, ensuring faster and broader support. Fostering Economic Development in the Principality With this reform, Monaco demonstrates its commitment to nurturing a dynamic and resilient economic ecosystem. The revised aid system is designed to stimulate local entrepreneurship, enhance business competitiveness, and attract new professional ventures. 📎 Read Ministerial Decree No. 2025-179 (April 8, 2025): https://lc.cx/ITGN0i

Monaco, April 3, 2025 – The National Council has adopted Bill No. 1094 giving rise to Law No. 1.573 of 8 April 2025 on the modernisation of company law published in the Journal de Monaco on 18 April 2025, marking a major step forward in the Principality’s corporate law framework. This comprehensive reform seeks to boost Monaco’s economic appeal while reinforcing legal certainty, transparency, and efficient corporate governance. A Reform Tailored for a Modern, Competitive Business Environment Monaco’s updated corporate legislation reflects the country’s commitment to providing businesses with a robust, flexible, and transparent legal framework. The adoption of Law No. 1.573 introduces key improvements aimed at supporting entrepreneurs and investors alike. Highlights of Law No. 1.573 The reform introduces several significant advancements, including: Creation of the Sole Limited Liability Company (SURL): a new vehicle tailored for individual entrepreneurs wishing to operate through a corporate structure. Legal recognition of the Société Civile de Moyens (SCM): a flexible framework for professionals to pool resources. Legal personality granted upon registration: companies now acquire legal status immediately upon incorporation. Authorization of industry contributions: SARLs and SAMs may now include non-monetary contributions such as know-how or services. Remote meetings: board and shareholder meetings may be held via videoconference. Minority shareholder alert rights: enhanced tools for corporate governance and minority protection. Streamlined formalities: simplified procedures for changes to share capital, company name, or registered office. Recognition of preferred shares: enabling tailored economic and voting rights for shareholders. Introduction of a conciliation procedure: a preventive and amicable mechanism to resolve company difficulties. A Stronger Legal Framework to Attract and Retain Business With this reform, Monaco strengthens its position as a dynamic, forward-looking jurisdiction offering legal clarity and operational flexibility for businesses of all sizes. 📄 Learn more: https://www.conseil-national.mc/2025/04/23/n1573-loi-relative-a-la-modernisation-du-droit-des-societes-2/

The 2025 edition of the Spear’s guide, a leading publication for high-net-worth advisory services, has listed Édouard Mousny, Partner and Head of the Yachting Department at Gordon S. Blair Law Offices, among the top lawyers in yachting and aviation law.   He is recognised for his experience advising on the purchase and sale, construction, financing, chartering and registration of large yachts and vessels.   This recognition highlights the firm’s ongoing commitment to providing tailored legal support in complex and cross-border matters involving high-value maritime assets.   🔗 Read the full article on Spear’s: https://spearswms.com/law/best-aviation-yacht-lawyers-high-net-worth-individuals/

On December 20, 2024, the promulgation of Law No. 1.569 of December 12, 2024, concerning internships in professional environments, was published in the Journal de Monaco. This new legislative text strengthens the regulation of professional internships undertaken in the Principality by young individuals and closely resembles the provisions already in place in our neighboring state, France.   Unsurprisingly, the new law introduces an age limit for undertaking professional internships (29 years old), requires host organizations to formalize this contractual relationship through an internship agreement, strictly limits the duration of an internship to six months, and mandates financial compensation in the form of a stipend for any internship lasting more than two months.   Furthermore, these legal provisions define the conditions under which a non-European Union student can undertake an internship.   Naturally, these new regulations also serve as a reminder to businesses that an intern is not an employee! Law No. 1.569 limits the number of interns present at the same time, based on the size of the host organization’s workforce.   This reminder should not be taken lightly, as courts have the power to disregard the intern classification if the employer integrates the intern into their workforce and assigns them tasks as if they were a permanent employee, without providing the training they are entitled to.   This risk is significant, as in the event that an internship agreement is reclassified as an employment relationship—by default, an open-ended contract—the intern may be entitled to back pay, paid leave compensation, and severance payments. Additionally, the employer could face criminal penalties for violating employment regulations.   To ensure compliance with this new legislation, our employment law team is available to discuss the matter and assist you.

The Spring Budget 2024 has introduced significant revisions to the resident non-dom tax regime, marking a pivotal shift in the UK's approach towards international residents and those considering the UK as their fiscal residence. These changes, subtly woven into the financial fabric of the country, signal a recalibration of the incentives that once made the UK an attractive destination for global wealth and talent. At the heart of these reforms is a nuanced message: the landscape for non-dom residents in the UK is transforming. This evolution may impact the desirability of the UK for individuals seeking tax-efficient environments and necessitates a thorough analysis for those already under this regime as well as for advisors assisting such clients. The broader implication is clear - the UK is adjusting its sails in the global fiscal waters, potentially affecting its allure as a haven for international individuals. This development beckons a reevaluation of fiscal strategies and invites stakeholders to consider alternative locales that align with their financial and lifestyle aspirations. In light of these changes, the conversation around fiscal planning and strategic relocation becomes ever more crucial. Monaco, with its favorable tax regime and lifestyle benefits, emerges as a compelling alternative worth exploring. GORDON S. BLAIR LAW OFFICES is at the forefront of guiding individuals through these complex transitions, offering expert insights into how the new UK tax changes compare and contrast with the opportunities available in Monaco. The current juncture is a call to action for those impacted by the non-dom regime changes to reassess their positions and strategies. It's an opportunity to delve into a dialogue on the implications of these reforms and to explore new avenues that secure fiscal efficiency and lifestyle preferences. GORDON S. BLAIR LAW OFFICES: Navigating Towards Favorable Shores. The time to engage in this critical conversation is now. With expertise in navigating the complexities of international tax planning, GORDON S. BLAIR LAW OFFICES is poised to provide tailored advice that anticipates and responds to the evolving landscape. Reach out to explore how these developments affect your situation and to chart a forward path that is both informed and strategic.

We are honoured to be recognized by The Legal 500 (Legalease) for our practices in Private Client – Tax, Estate Planning, Family Structures, and in M&A, Business Law. We thank our clients for their trust. Xavier de Sarrau David de Pariente Alexis Madier Edouard Mousny Corinne RICCIARDELLA

Par Edouard Mousny The Principality of Monaco strengthens its legal instruments to fight money laundering. On 30th November 2022, in the context of the fifth evaluation cycle of the Principality of Monaco carried out by the MONEYVAL Committee, the National Council adopted : - Law No. 1.535 on the seizure and confiscation of instrumentalities and proceeds of crime, which has two objectives: on the one hand, within the framework of the Monetary Agreement concluded by the Principality of Monaco with the European Union on 29th November 2011, it transposes into domestic law the provisions of Directive 2014/42/EU of the European Parliament and of the Council of 3rd April 2014 on the freezing and confiscation of instrumentalities and the proceeds of crime in the European Union; and on the other hand, it responds to the observations of the MONEYVAL Committee and the FATF recommendations, concerning the anti-money laundering and countering the financing of terrorism system implemented in Monaco. - Law No. 1.536 amending Title XI of Book IV of the Code of Criminal Procedure relating to international judicial assistance, which is intended to : to formalize the procedure for requesting international judicial assistance; to clarify the treatment of foreign requests issued for political purposes or that do not comply with the procedural principles laid down by the European Convention for the Protection of Human Rights and Fundamental Freedoms of 4 November 1950; and to regulate seizure measures taken pursuant to a request for international legal assistance. - Law No. 1.537 supplementing Law No. 1.362 of 3rd August 2009 on the fight against money laundering, terrorist financing and corruption, which specifies, on the recommendation of the MONEYVAL Committee, that professionals carrying out a domiciliation activity are subject to the legal provisions on the fight against money laundering, terrorist financing and corruption These new legal provisions, which came into force on 17th December 2022, represent a further step forward in the control of anti-money laundering and reflect the Principality of Monaco's desire to meet the highest international standards. GORDON S. BLAIR has proven expertise in the implementation of compliance monitoring procedures and is available to assist its clients in these matters.

The Principality of Monaco: a little-known attractive tax framework for the deployment of an international business activity Monaco’s attractive tax system is commonly known for the total absence of income tax and wealth tax applicable to individuals residing in Monaco (other than French nationals), as well as the full exemption of gift and inheritance tax between spouses and in direct lines, giving rise to wealth planning opportunities for high-net-worth individuals. Yet, the Principality of Monaco is also a destination of choice for the deployment of an international business activity by multinationals or foreign entrepreneurs. Indeed, the Principality is an international onshore economic and financial centre that benefits from a central location within Europe, offering considerable operating advantages for the deployment of an international business activity on a day-to-day basis. In addition to its ‘qualitative’ benefits, among which its sophisticated eco-system and rather low operating costs compared to London or other European economic hubs, the Principality provides for a stable and favourable business tax framework where corporate income tax applies only to certain business activities meeting a territorial criterion, including a five year progressive corporate income tax exemption for qualifying new businesses. This article provides a high level overview of the main advantages offered by Monaco’s business tax framework. A dynamic economic hub that meets international requirements for tax transparency and exchange of information Although the Principality is neither a member state of the European Union nor the OECD, it offers the advantages of an independent state, while complying with the current international tax environment where transparency and exchange of information have become key. Indeed, Monaco is a fully whitelisted jurisdiction for tax purposes per the Council of the European Union held on the 5 December 2017 where the Principality was withdrawn from any grey lists of non-cooperative states for tax purposes. The Convention on Mutual Administrative Assistance in Tax Matters developed by the Council of Europe and the OECD is fully applicable in Monaco and 35 tax information exchange agreements are currently into force. Furthermore, the Principality is a participating country to the inclusive ‘BEPS’ framework (‘base erosion and profit shifting’) developed by the OECD, thereby committing to comply its tax legislation with OECD anti-abuse recommendations. As a result of the above, Monaco generally does not fall under domestic tax anti-abuse mechanisms (CFC’s provisions, high taxation of transactions with blacklisted jurisdictions, etc) refraining multinationals and entrepreneurs from establishing a business in a tainted jurisdiction. A stable and attractive business tax framework Monaco does not provide for any direct tax on business profits other than corporate income tax (‘Impôt sur les bénéfices’) (‘CIT’) for certain business activities. The scope of Monaco CIT is limited to commercial or industrial business activities which derive more than 25% of revenue outside of Monaco. Conversely, non-commercial business activity, such as strategic, intellectual or R&D consulting activities, are fully exempt from Monaco CIT. In other words, CIT only applies when the two following cumulative criteria are met: A qualitative criteria, pertaining to the nature of the business activity: CIT applies only to profits derived from business activities of a commercial (eg sale of goods) or industrial (eg production of raw materials) nature; and A territorial criteria: CIT applies only if more than 25% of the revenue incurred upon the commercial or industrial activity is generated outside of Monaco. Conversely, if 75% of the revenue is generated in Monaco, no CIT applies (eg retail store activity). By exception to the above criteria, CIT applies to companies whose business activity consists of earning revenue from patents, literary or artistic property rights. When applicable, the rate of CIT is aligned with French CIT, ie its nominal rate is 25%. However, rules governing the computation of the taxable basis are rather flexible, allowing in practice reducing significantly the effective tax rate. In this regard, the cap mechanism applicable to the tax deduction of qualifying director fees is rather generous compared to that applicable in most EU jurisdictions. This gives rise to relocation opportunities to Monaco for individual directors – although it is not compulsory for a Monaco joint stock company (‘Société Anonyme Monegasque’) to have Monaco-based directors: director fees are not taxable in the hands of the beneficiary directors in Monaco while allowing reducing the taxable basis of the Monaco paying entity – we also note that director fees do not bear any social charges and the possibility for individual directors of obtaining advantageous Monaco social security insurance under competitive conditions. A number of corporate tax incentive regimes apply Qualifying new businesses set up in Monaco can benefit from a progressive five-year tax exemption: a full CIT exemption applies during the first two fiscal years, then CIT is progressively applied, ie CIT is based on 25% of the tax profits of the third fiscal year, increased to 50% the fourth year and 75% the fifth year. The incentive ‘headquarter’ tax regime makes the Principality of Monaco a preferred jurisdiction to locate foreign companies’ administrative offices. Indeed, qualifying headquarters, which, for the sole benefit of their group, carry out management, coordination or control tasks benefit from a reduced effective CIT rate of circa 2%, calculated on a flat-rate basis of their operating costs. R&D tax incentives also apply: qualifying R&D businesses based in Monaco are supported through the benefit of R&D tax credits that can net off CIT due by the company, as the case may be. Absence of ‘exit costs’ There is no ‘tax barrier’ to cross-border financial flows: no withholding tax applies in Monaco to dividend, interest or royalty paid by a Monaco-based entity to non-Monaco beneficiaries. Besides, shareholders are not taxable on capital gains incurred upon the sale of shares in a Monaco company. At a glance At the level of the Monaco company subject to CIT: CIT tax base may be significantly reduced through the payment of director fees to Monacobased or foreign directors (whether individuals or companies) At the level of the UK parent company: No withholding tax will apply in Monaco on director fees and/or dividends paid by the Monaco company; Dividend should be exempt under the parent-subsidiary tax regime; Capital gains incurred upon the sale of share in the Monaco company will not be taxable in Monaco and should be exempt in the UK under the substantial shareholding exemption (SSE). VAT – Monaco is part of the European Union VAT systemMonaco forms a customs union with France and is thus part of the European VAT system (Directive 2006/112/CE dated 28 November 2006 on the common system of value added tax ) – the Monaco standard VAT rate is 20%. As a result of the above, in addition to multinationals expanding in Monaco, we note an increasing number of foreign entrepreneurs relocating to Monaco, thus benefiting from a full income tax exemption, and deploying their business from Monaco, either through consulting services rendered to their foreign-based business – with literally no risk of attracting any tax basis in Monaco based on a deem effective management of the foreign business from Monaco, or through the setting up of a new operating company in Monaco. /