Monaco's Zero Income Tax Policy Explained
Monaco has maintained a zero personal income tax policy since 1869. This makes it one of the world's most attractive destinations for high-net-worth individuals seeking tax optimization.
The Principality levies no tax on personal income, capital gains, or wealth for most residents. This applies equally to Monegasque nationals and foreign residents who establish tax residency in Monaco.
The absence of income tax extends to all forms of personal income. This includes salaries, dividends, interest, and rental income earned globally. There are no reporting requirements for worldwide income unless you fall under the French exception.
The French Nationals Exception
French citizens residing in Monaco face a critical exception to the zero-tax rule. Under the Franco-Monegasque bilateral convention signed on May 18, 1963, French nationals must pay French income tax even while living in Monaco. This treaty was established after France imposed a customs blockade in 1962 in response to an influx of French citizens relocating to Monaco to avoid taxation.
The agreement requires French nationals domiciled in Monaco to pay income tax to France on all worldwide income under the same conditions as French tax residents.
Who Is Exempt from the French Tax Obligation
Two categories of French nationals escape this requirement:
- Those who established residence in Monaco before October 13, 1957, and maintained it for at least five years by October 13, 1962
- French nationals born in Monaco who have continuously resided there since birth
All other French citizens remain subject to French income tax regardless of how long they live in Monaco.
Corporate Tax in Monaco
While individuals enjoy zero income tax, companies operating in Monaco face corporate taxation under specific conditions. The corporate income tax is known as ISB (Impôt sur les Bénéfices). The standard ISB rate for 2026 is 25%.
This represents a reduction from the previous rate of 33.33% and applies to qualifying businesses.
When Corporate Tax Applies
Companies are subject to ISB if they meet either of these criteria:
- More than 25% of business turnover is generated outside Monaco
- The company derives income from patents, trademarks, intellectual property rights, or licensing fees regardless of asset location
Conversely, companies generating at least 75% of revenue within Monaco's borders are exempt from corporate tax.
New Company Tax Benefits
Newly formed companies benefit from a graduated tax structure. They enjoy 0% corporate tax for the first two years, followed by reduced rates of 6.25% in year three, 12.5% in year four, and 18.75% in year five before reaching the full 25% rate from year six onward.
Value Added Tax (VAT)
Monaco applies VAT at the same rates as France due to the customs union established in 1963. The standard VAT rate is 20%. Reduced rates of 10%, 5%, and 2.1% apply to specific goods and services.
This alignment with French VAT rates simplifies cross-border transactions between Monaco and France.
Businesses operating in Monaco must register for VAT and comply with the same administrative requirements as French companies.
What Monaco Does Not Tax
The list of taxes Monaco does not impose is equally important as understanding what it does tax.