Starting a business in Monaco – Registration, Taxes, Benefits

Monaco's distinctive political and economic landscape, coupled with its comprehensive finance and security activities, renders it an exceptionally appealing hub for entrepreneurs from across the globe.

With a modest population exceeding 39,000, Monaco boasts over 11,000 companies and firms. This growing enterprise sector is largely attributed to the principality's commitment to fostering an optimal business environment.

Establishing a Company in Monaco

Creating a new company in Monaco involves two principal steps: securing initial authorization from the authorities to engage in any business activity within the principality, and completing the registration formalities for the company.

Securing Authorization

Obtaining approval from the authorities is a prerequisite for both starting a new business and purchasing an existing one. Operating any business in Monaco requires specific authorization. Furthermore, certain business activities necessitate a distinct license. Applications for company registration are processed by the Direction de l’Expansion Economique, with a legally stipulated review period of up to three months. Upon approval, the next phase begins.

The Registration Process

The concluding step is to register the company with Monaco's Trade Register, Statistical Office, and Tax Authority. It's noteworthy that a registration tax, equating to 1% of the share capital, is levied by the state. Within three months of receiving authorization, a general assembly of the company's shareholders must convene. Similar to other jurisdictions, a legal address in the place of registration is essential for business operation.

Legal firms typically manage these procedures, although one may also engage a local notary office for the preparation and certification of the requisite statutory documents. The process of registering a company approximately takes three weeks. Applications are open to both residents and foreign nationals.

Choosing the Appropriate Business Structure for Company Formation in Monaco

Entrepreneurs aiming to conduct business within Monaco have the option to either embark as a sole proprietor or to incorporate a company. The following are the most favored business entities in the principality:

SARL (Société à Responsabilité Limitée - Limited Liability Company)

A minimum share capital of 15,000 euros is required.

- At least two shareholders are needed.
- The company's activities must be commercial in nature.
- A managing director must be appointed.

SAM (Société Anonyme Monégasque - Monaco Joint Stock Company)

A minimum of two shareholders, who can be either individuals or legal entities.
A minimum share capital of 150,000 euros is required.
Commercial activities are not mandatory.
A Monaco notary must be involved in drafting the articles of association and the declaration of establishment.

SNC (Société en Nom Collectif - General Partnership)

The shareholders set the share capital.
The company can only engage in commercial activities.
Shareholders have full liability for the company's debts.
Typically, it's a family business.

Business Taxes in Monaco

Monaco stands out for its distinctive tax regime, appealing to non-resident individuals keen on relocating or doing business within the principality.

Companies operating in Monaco benefit from an exemption from income tax on their business activities within Monaco, provided a significant portion, specifically 75%, of their commercial operations are conducted within the principality. This arrangement exempts them from income tax but not from VAT obligations. However, companies engaging in more than 25% of their business outside Monaco face a 33.33% income tax rate.

A notable advantage for new companies is the provision of "tax holidays" for a few years:

In the first two years, they are fully exempt from income tax.
The third year sees the tax base set at 25% of profits.
In the fourth year, the tax base is 50% of profits.
The fifth year increases to 75% of profits.
From the sixth year onwards, profits are taxed in full.

Tax optimization opportunities exist through the high salaries of company directors, which are not taxed yet deductible from taxable income as expenses. Directors can also account for a substantial part of their personal expenses—such as dining, personal transport, and travel—as company expenses.