The Principality of Monaco, the world’s second smallest country, has an open economy which welcomes foreign investment. Monaco enjoys a high standard of living and low unemployment. Except for French citizens, foreigners ( and Monegasque) actually living and working in Monaco are not subject to personal income tax. Corporations are also frequently able to benefit from various tax incentives. There are no restrictions preventing foreigners and non-residents from opening bank or brokerage accounts in Monaco or from buying property. More than half of the real estate investments in Monaco are estimated to be made by non-residents. Monaco is well known for its security and political stability.
Monaco’s economic and regulatory system is closely tied to that of France and Monaco uses the Euro as its currency. The convention of May 1, 1963 brought French and Monegasque territories, including territorial waters, under one customs union resulting in the application of French customs law in Monaco. Although Monaco is not a full member of the European Union, the customs union with France brings it under EU customs laws, thus guaranteeing that the transfer of goods and services from and into Monaco within the single European market.
Economic activity within Monaco is strictly monitored by the Government. Prior approval of the government is required before conducting any economic activity in The Principality. The Monegasque authorities issue approvals based on the type of business to be engaged in. The approval is personal and may not be re-assigned. Any change in the terms requires the issuance of a new approval. In the financial sector, the creation of any financial organization is subject to both the approval of the French CECEI (Committee for Credit and Investment Institutions) in Paris and the Monegasque financial supervisory authorities. Offshore companies are subject to the same due diligence and suspicious transaction reporting regulations as other banking institutions.
In March 2009, The Principality of Monaco announced that it would follow the international norms in matters of tax transparency. In September 2009, Monaco was removed from the Organization for Economic Cooperation and Development (OECD) list of “non-cooperative” countries in terms of provision of tax information. Thirteen tax information exchange agreements (TIEA) have been signed by the Principality of Monaco, including one with the United States on September 8, 2009.
Monaco does not publish national income figures nor does it publish its GDP figures. The country’s budget comes from taxes on industry, trade and services, a vibrant tourism sector, and several government-owned enterprises, most notably on the country’s famous casinos. Approximately 50% of the government revenue is estimated to come from the Value Added Tax (VAT) applied by the French Administration on Monaco.
There is a high concentration of financial professionals, as might be expected, in this center of international business. French banking law applies in Monaco, thus subjecting banks in Monaco to the same level of supervision as French banks. There are approximately 460 banks and financial institutions operating in Monaco, managing an estimated 750 billion Euros. 46% of the clientele is non-resident.
There is no World Bank “Doing Business” report for Monaco; no Transparency International “Country Corruption Report” for Monaco, and no Heritage Foundation “Economic Freedom Index” report for Monaco.