The use of offshore structures as a means of holding real estate in Monaco is common. The objective is usually part of general estate and succession planning or asset protection, as well as for tax planning reasons.

Cecile Acolas is based in Monaco and specialises in tax advice and planning for residential property in France for Ellisium Partners. Ellisium Partners is a consortium of English-speaking specialists, which together provide a one-stop-shop for UK and international buyers looking for a luxury home on the Cote d’Azur and surrounding region.

Monaco is a popular choice of tax residence not only because there is no wealth or income tax but also because of its aspirational location on the French Riviera, its high quality of life and the level of security.”

Commenting on the latest French tax reforms which are applicable from 1st January 2012 and the additional tax advantages when buying a property in Monaco, Cecile Acolas says: “The June 2011 law reduced to 4.5% the registration tax charged on a typical Monaco property sale. Monaco in particular allows an investor to rent their property without any tax on the rental income and also to sell a property without paying Capital Gains Tax.

“It is also possible to own a property in Monaco through offshore companies and trusts without being penalized and providing a secure and discrete investment, which is good for clients wishing to protect their assets. Holding a Monegasque property through offshore companies and trusts could also allow them tax advantages in Monaco. Last but not least, it is possible to transfer properties in Monaco to spouse or children upon demise without paying inheritance tax – whereas in most European countries inheritance tax is quite high.”

The marina at Monaco's Port Cap d'Ail

On a transfer of ownership the purchaser acquires the shares in the offshore entity, thus indirectly acquiring the principal or sole asset, the real estate in Monaco. Law 1381 (29th June 2011) which is now in force substantially reduces the tax payable by individuals purchasing a property in their own name or through a Monaco SCI, while slightly increasing the tax on a purchase through an offshore entity.

Previously, such a transaction taking place offshore escaped tax but, in a move to try to bring greater fairness, such transfers will now be subject to tax.

Only 20 percent of Monaco’s 35,000 residents are Monégasque, so the market sees many foreign buyers, most typically seeking modern apartments close to the Carré d’Or, the beach area of Larvotto, and in Fontvieille, a district reclaimed from the Mediterranean in 1981. Tim Swannie, Director of Ellisium Partners says: “There are no restrictions on foreign buyers and most buyers pay in cash, but it is possible to cover as much as 70 percent of the purchase price with a mortgage.

“Previously, buyers were mainly French but these days there are more from elsewhere in Europe, particularly Britain and the northern countries, but also from the USA, Canada, Australia, South Africa and the Middle East. Russian buyers have had a strong presence over the past five years.”

For more information on recent tax changes, contact www.ellisiumpartners.com

Apt 1: Fontveille, Monaco 3,900,000€          View: Port Cap d’Ail, Monaco           Apt 2: Fontveille, Monaco 6,975,000€