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© DR

Monaco is one of the only countries in the world that does not collect an income tax. This unique system has been proving itself to be effective since 1869.

Historically speaking, the lack of an income tax on individuals in the Principality dates back to the nineteenth century.

In 1848, at a time of revolution in Europe, the communes of Roquebrune-Cap-Martin and Menton, which were until then part of the Principality of Monaco, seceded. Having had enough of the tax burden in the Principality, the two regions became part of France. Monaco rediscovered its independence, but lost 80% of its territory and was forced to develop a new economic model.

In the face of this significant loss, which deprived the Principality of its agricultural land and main sources of income, Prince Charles III invented the concept of aristocratic tourism and ordered construction of the Casino, the Opera, luxury hotels, and more besides.

Thanks to these new sources of income, and to ensure that there would be no repeat of the 1848 crisis, the Prince abolished personal income tax in 1869. The only exception, which came later, relates to French nationals, who are governed by the Franco-Monegasque Bilateral Treaty of 1963 (and subject to French taxes).

© Direction de la Communication - Michael Alesi
© Direction de la Communication - Michael Alesi

Since the nineteenth century, Monaco has funded itself primarily through revenue from monopolies, a value-added tax set at 20% on consumption, a tax on the profits of certain companies, and transfer duties and inheritance taxes. There are no wealth taxes, property taxes or housing taxes in the Principality of Monaco.

The only direct tax collected in the Principality is a tax on profits made through industrial and commercial activities. It applies to businesses engaging in industrial or commercial activity that generate more than 25% of their turnover outside Monaco.

In 2019, Monaco’s budget remained in surplus, feeding into a reserve fund totalling EUR 5.2 billion. The Principality is one of the very few countries which does not have any public debt.

Monaco is also part of a customs union with France, established under the Franco-Monegasque Customs Treaty of 18 May 1963, and the EU intra-community VAT system has been applied in Monaco since 1 January 1993. Although it is not an EU member state, the Principality is, in effect, included within the European customs area.

© Direction de la Communication
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