The Principality of Monaco is a true dwarf state, with a surface area of 2.02 km2 (0.78 square miles) and an estimated population of only 36,000 inhabitants. It holds the record for being the most densely populated nation in the world, which is reflected in the rental prices.
If you like fashionable situations, snobs, wannabe rich and the real rich, then you just have to go to Monaco. The country isn’t only thriving, it’s also extraordinarily safe. It has the largest police force in the world both per capita and per square metre and there’s a 24-hour video surveillance system in place which covers the entire surface area of the Principality. The Principality also organises one of the most famous and mythical Formula One races in the world: the Grand Prix of Monaco.
In Monaco, taxes are still as good as non-existent (unless you’re a resident of Monaco with the French nationality). Real estate in the Principality of Monaco is very expensive but you can always rent a small studio in Monaco where you ‘officially’ reside and simultaneously rent something roomier and more spacious in Nice or just across the border in Italy for example (in a discreet way to avoid trouble with the local tax authorities of these countries).
Monaco is packed with celebrities who enjoy the pleasant (fiscal) climate, such as former James Bond – Roger Moore, Lewis Hamilton, Jenson Button, Novak Djokovic, Caroline Wozniacki, etc.
How to become a resident of Monaco
Now, how do you become a resident of the Principality of Monaco? Of course, you should first ask yourself the question whether you want to live in such a tiny country which, in spite of all the reclaimed land from the sea, remains ridiculously small. A basic studio costs at least EUR 600,000.
Basically, there are three methods to become a resident of Monaco:
- You were offered an employment contract by an authorised Monegasque employer (but these are few and far between);
- You intend to set up a business activity in Monaco: only once you have an official document authorising the establishment of a company you can obtain a residence permit;
- You can demonstrate that you’re wealthy and have sufficient income without engaging in any gainful employment. You will need to open a bank account with a bank in Monaco, deposit minimum EUR 500,000 and acquire a bank reference of that bank stating you have sufficient funds to support yourself in Monaco.
If you’re a non-EU national, then you’ll first need to apply for a long-term visa. After obtaining the visa, you can then proceed to the next step, which is applying for a residence permit. Monaco isn’t a contracting party to the Schengen Convention (an agreement which entails no internal border controls and a common visa policy between the contracting states).
However, Monaco concluded two bilateral agreements with France and its territory is situated within the external borders of the Schengen area. In practice, this means that EU nationals and Monaco nationals can travel freely without a visa throughout the whole Schengen area, including Monaco. As a consequence, European nationals can start immediately with the application process for the residence permit and skip the visa application process applicable to non-EU nationals.
To obtain a residence permit, you must contact the Residents Section of the Directorate of Public Security. You will then have to struggle through all the necessary paperwork. All the required documentation (such as completed application form, birth certificate, a certified copy of your international passport, proof of accommodation, etc.) needs to be translated into French by a qualified translator.
You’ll also need to obtain and submit a certificate of good conduct: if you were convicted for criminal offences, you’re not welcome in the Principality. So you need to prove that you don’t have any criminal records in the countries where you were residing before the application.
As an applicant, you’ll also undergo an interview where you will be asked questions about your family, your education, your qualifications, your work experience, etc. Once you struggled through the whole application process, you will obtain a temporary residence permit valid for twelve months.
How to remain a resident of Monaco?
So you received your temporary residence permit which is valid for one year. You must renew this temporary residence permit annually for the first three years of your residence (so you have to renew it twice). At the end of the first three years, you can apply for an ordinary residence permit valid for three years. This ordinary residence permit has to be renewed at the end of the three-year period (to start another three-year period).
During these first nine years of residence, you’re required to spend, on a yearly basis, at least three months of your time in Monaco. After the first nine years of residence, you can then apply for a privileged residence card valid for ten years. This privileged residence permit grants the permit holder the right to apply for citizenship (meaning the right to apply for the Monegasque nationality) and the privileged residence permit holder is required to spend at least six months and one day in Monaco on a yearly basis.
In order to renew the residence permit, the following documents are required: a completed application form, a copy of the lease or property deed, a copy of the last two electricity bills, and a letter from the bank proving sufficient income or a certificate of employment or an extract from the Register of Commerce (depending on which method was chosen to apply for the residence permit). No need to panic, the fulfilment of these requirements (with regard to the electricity bills, for example) can be arranged.
What about taxes?
The good news is that income tax was abolished in 1869! All foreigners officially residing in Monaco and people with the Monegasque nationality can benefit from this zero personal income tax regime. There’s only one exception: French nationals who are resident of Monaco do have to pay personal income tax which is computed according to the principles of French tax law. The amount payable is paid directly to the French government. The Principality of Monaco doesn’t levy capital gains tax nor wealth tax.
Inheritance tax and gift tax are payable, but only with regard to assets situated in Monaco. In other words, these taxes don’t apply to assets situated outside Monaco (money in a foreign bank account for example). Clever individuals know how to benefit from this… In the case property is situated in Monaco (real estate for example), in practice, this means only a modest inheritance tax percentage applies when the owner passed away. But then again, there’s a beautiful exemption for heirs in the direct line (parents, spouse and children). They don’t have to pay inheritance tax when they inherit assets (situated in Monaco) of a resident of Monaco!
Analogously, when the resident of Monaco makes a gift to beneficiaries in the direct line, no gift tax is due. In the case, brothers and sisters of a resident of Monaco inherit assets or receive a gift, 8% tax is due. In the case unrelated persons of a resident of Monaco inherit assets or receive a gift, 16% tax is due. As said before and very important to remember, inheritance and gift tax don’t apply to assets situated outside the Principality of Monaco.