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Offshore Trusts Report: Monaco

Legal Framework and Formation Rules and Fees

The concept of a trust in Monaco can be best understood in terms of its historical development. As a civil law jurisdiction the Principality enforced its internal laws governing strict heirship rules on any dispositions made by Monegasque residents. Consequently some British and United States nationals residing in Monaco appealed to the Government to be allowed to use the vehicle of a trust so as to be able to have the same flexibility to dispose of their assets on death as existed under the laws of common law jurisdictions of which they were nationals.

Law 214 was passed with a view to allowing foreigners resident in Monaco to set up trusts governed by their own national law. The law was not passed to create a body of Monegasque trust law or introduce the concept of a trust into Monaco. Where a dispute arises the Monaco courts may exercise jurisdiction: unless Monegasque law makes express provision for a legal issue to be governed by its internal law (e.g. appointment of trustees) the courts of Monaco will apply the principles of the foreign proper law governing the trust.

As well as Law 214 Trusts, Monaco law allows for trusts registered in a foreign jurisdiction to be administered from Monaco; such trusts are not dealt with here.

The Law 214 Trust has the following characteristics:

  • The settlor of such a trust must be a resident of Monaco;

  • The trust deed must be registered with the result that information relating to the beneficiaries, settlors and property settled under the trust is publicly available;

  • Registration fees are payable according to the number of beneficaries;

  • Foreign judgments (including judgments relating to forced heirship and foreign inheritance laws) are recognized and there are no specific asset protection laws in place which protect a trust from challenge by creditors other than the protection offered by general insolvency law;

  • All trust powers must be either stated in the deed or implied by the foreign proper law governing the trust since there is no statutory schedule of trust powers in Monaco;

  • Trust documents must be in French;

  • Monaco internal law makes provision for a trust not to have a perpetuity period so long as it is not a charitable trust;

  • Monaco law requires that each trust has at least one trustee chosen from a Government list of approved trustees;

  • It has been argued that only nationals of common law jurisdictions can set up Law 214 trusts and not the nationals of civil law jurisdictions such as Italy whose internal law does not recognize the concept of a trust; at present this remains an academic matter since the issue has never been litigated;

  • There is some doubt as to whether a Law 214 trust can make a disposition of immovable property in Monaco subject to the principles of the foreign proper law governing the trust as opposed to Monaco internal law;

  • Implied trusts cannot arise: an approved lawyer must certify the validity of a trust formed under a foreign law;

Trusts pay fees to the Principality as follows (at the time of writing): One-time registration fees are payable on formation of a trust, at the rate of 1.3%,1.5% or 1.7% of the value of the settled property depending on whether the trust has 1, 2, or 3 or more beneficiaries. The fee drops to between 0.25% and 0.45% where the property settled is Monaco real estate. Alternatively the trustees can elect to pay an annual tax of 0.2% of the value of the settled property. Lower tax rates may apply in relation to trust assets which consist of shares in Monegasque companies. An asset placed in a trust on which registration tax has been paid is not subject to inheritance or gift tax.

Monaco is not a good jurisdiction in which to form a trust since the key characteristics of a Law 214 Trust do not compare favorably with other offshore jurisdictions:

  • Settlors must be residents of Monaco; thus a Monaco trust has little relevance to offshore financial planning;

  • The trust deed must be registered with the result that information relating to the beneficiaries, settlors and property settled under the trust are easily verifiable matters. In most offshore common law jurisdictions the converse applies.

   

The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

New Zealand

New Zealand: Legal Framework and Formation Rules and Fees
New Zealand: Review of the Law of Trusts
New Zealand: Taxation of Trusts

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees

 


Monaco News

Global Tax Forum Issues Peer Reviews Monday 4/10/2010 The Global Forum on Transparency and Exchange of Information for Tax Purposes has issued the first phase of peer reviews covering the legal and regulatory frameworks for transparency and exchange of tax information in Bermuda, Botswana, Cayman Islands, India, Jamaica, Monaco, Panama and Qatar.

OECD Reports On Its Progress With International Tax Standards Wednesday 20/1/2010 According to the Organization for Economic Cooperation and Development, the focus of the Global Forum on Transparency and Exchange of Information is now shifting – from commitments and agreements to achieving an effective implementation of the standards.

Monaco And The Netherlands Sign TIEA Thursday 14/1/2010 The Netherlands government has announced that it has concluded a Tax Information Exchange Agreeement with the Principality of Monaco.

Bahamas On Track For OECD Tax Transparency Goal Tuesday 5/1/2010 The Bahamas government has announced that that it has now concluded Tax Information Exchange Agreements with 23 countries, and is expected to be recognized by the Organization for Economic Cooperation and Development as a territory that conforms to internationally agreed standards in this regard.

Netherlands Signs TIEAs With Malaysia, The Bahamas Thursday 10/12/2009 The State Secretary of Finance of the Netherlands, Jan Kees de Jager signed Tax Information Exchange Agreements with Malaysia and the Bahamas on December 4.

Argentina and Monaco Sign Tax Accord Monday 19/10/2009 Argentina and Monaco have signed a tax accord that enables them to share information on tax matters in line with the standard OECD terms, according to an announcement by Argentine finance minister, Ricardo Echegaray.

Liechtenstein's TIEA Target On Schedule Thursday 24/9/2009 It emerged this week that the Liechtenstein government has boosted the number of tax information exchange agreements that it has in place, with the signature on Monday of an OECD-compliant agreement with Monaco, the initialing of a TIEA with St Vincent and the Grenadines, and an agreement to proceed with information exchange with the Irish authorities.

St Kitts And Nevis Signs First OECD Model Treaty Thursday 24/9/2009 St Kitts and Nevis' Prime Minister, Denzil Douglas, has announced the signing of its first convention for the avoidance of double taxation and fiscal evasion with respect to taxes, signed with Monaco.

Bahamas Signs Second TIEA, With Monaco Wednesday 23/9/2009 The Bahamas government and the Principality of Monaco have concluded negotiations for a tax information exchange agreement.

Italian Tax Amnesty Blow For Non-TIEA Countries Monday 21/9/2009 The Italian Revenue Agency has confirmed that repatriation is the only possible means of entering into the current tax amnesty for undeclared assets held in countries that do not have, with Italy, an OECD compliant tax information exchange agreement.