Monaco: Taxation Of Works Of Art In Monaco

The Principality of Monaco is renowned for its high level of security for people and property, and is proving to be a very attractive country for high-net-worth individuals looking for security and lenient taxation.

Over the past five years, Monaco has become a veritable breeding ground for art collectors.

In this context, it is essential to understand the tax rules that apply to them, so as to anticipate the key stages in the ownership of these exceptional assets.

One of the special features of the Principality of Monaco is the absence of any direct taxation for individuals, whether in terms of income tax or wealth tax.

Notwithstanding this lenient tax regime, Monegasque residents may be required to pay taxes during the "life" of their works of art.

Importing works of art, collectors' items and antiques

First of all, it is important to remember that the French and Monegasque territories form a customs union organized by the Franco-Monegasque customs convention of 18 May 1963.

Transactions involving works of art, collectors' items and antiques are subject to special VAT rules laid down in European directives.

In addition, particular attention must be paid to the nature of goods imported into Monaco, especially when purchased outside the EU or when moving to the Principality.

Definitive imports of works of art, collectors' items and antiques to Monaco meeting the criteria defined in article A-187 A of the appendix to the Tax Code are taxed at 5.5% on their CIF value and exempt from customs duty. For other objects (less than 100 years old and not meeting the criteria of original works of art or collectors' items), customs duties and VAT at 20% will be payable.

A duty- and tax-free regime may be applied to imports of private goods, including works of art, when transferring a principal residence, provided certain conditions are met (residence abroad for at least 12 months, ownership of the goods for 6 months prior to the move, and import of the goods within 12 months of the move).

Sales and exports outside the Principality

The special case of precious metals

With a view to harmonizing French and Monegasque legislation, the Principality of Monaco extended the provisions creating a flat-rate tax on precious metals by Sovereign Order n°6.163 of 12 December 1977.

The rate of this tax has been raised to 11% as of 1 January 2018.

All sales of precious metals, including sales within the European Union and final exports to non-EU countries, are subject to this flat-rate tax.

However, this tax does not apply to exports if the owner is not ordinarily resident in Monaco, and if the purchase was made from a professional established in the Principality or gave rise to payment of the tax.

The general case of jewelry, objets d'art, collectors' items and antiques

However, no similar tax on the sale and export of jewelry, works of art, collectors' items or antiques has been introduced into Monegasque domestic legislation.

Consequently, with the exception of individuals domiciled for tax purposes under French domestic law (article 4B of the General Tax Code), sales and final exports to non-EU countries are exempt from all taxation.

Transmission free of charge

Under Monegasque domestic law, gift and inheritance taxes apply in Monaco to assets located or based in the Principality, regardless of the domicile, residence or nationality of the deceased or donor, or of the heirs or beneficiaries.

In Monaco, precious metals, works of art, collectors' items and antiques are treated in the same way as other movable property for the purposes of transfer tax rates.

The level of taxation depends on the degree of kinship between the deceased/donor and the heir/beneficiary/donor. As such, no taxation is due in the direct line (between parents and children or grandparents and grandchildren) and between spouses.

In other situations, the applicable rates are as follows:

In view of the large number of foreign nationals living in the Principality, it is important to remember that Monaco has only signed one bilateral tax treaty with France for the avoidance of double taxation in inheritance matters only. In principle, this treaty applies only to French and Monegasque nationals, unless a non-discrimination clause based on the nationality of the deceased applies.

We therefore recommend structuring the acquisition and ownership of these exceptional objects, and working with your lawyer to anticipate the costs involved in their transfer or transmission.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.