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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

Offshore Trusts Guide: Jurisdictions

Bahamas Barbados Bermuda British Virgin Islands Cayman Islands Cook Islands Cyprus Gibraltar Guernsey Isle of Man Jersey Liechtenstein Madeira Malta Mauritius Monaco Nevis New Zealand Panama Seychelles Turks & Caicos Vanuatu

Monaco News

Bermuda Discusses Rental Tax Proposal, Tax Data Exchange
Tuesday 12/2/2019
Bermuda's Government has stated that proposals for a rental income tax, detailed in a pre-budget report, were released as part of a consultation exercise and that the proposal for the levy has not been confirmed or formally announced. A decision on whether to include the measure in the Budget will be revealed when it is presented to parliament on February 22, 2019, it said.

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.

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.

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.

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.