Family office in MonacoEnzo Caputo2021-09-22T00:09:17+02:00
Family office in Monaco
Due to Monaco already being home to many ultra-wealthy families for a long time, over time it has automatically also become home to a considerable number of family offices. The Monaco government has reacted to this development by launching a regulatory framework for multi-family offices and actively supports the establishment of single-family offices.
Monaco, a short introduction
Monaco is the second-smallest state in the world, just after Vatican City. It only measures slightly more than 2 square kilometres and has less than 40,000 residents.
The Principality is governed by the Grimaldi family for a long time already. His Serene Highness Prince Albert II of Monaco is the current reigning monarch of Monaco. The Prince acts as head of state. Although Monaco is a constitutional monarchy, the Grimaldi family still holds considerable power.
Situated on the beautiful Mediterranean coast, Monaco enjoys a very pleasant climate and keeps attracting new wealthy residents every year, who relocate to the Principality in order to find security, stability and attractive tax conditions. Setting up a single-family office in Monaco can be part of a family’s relocation strategy.
Monaco’s (financial) infrastructure
The official language in Monaco is French, but English, Italian and other languages are also very common, as there are over 100 different nationalities residing in Monaco. High-tech industry, tourism (including gambling), financial services and luxury goods are Monaco’s main economic sectors. There is a considerable number of (international) private banks present in Monaco and an increasing number of single-family offices is being established in the jurisdiction.
❝ Establishing a family office in Monaco can be very well combined with relocating to Monaco ❞
Monaco is strongly affiliated with France, but not a part of it. There is a close cooperation/connection with France in a wide range of areas. Monaco is in a customs union with France and is dependent on France for its defence. The prudential and regulatory supervision of Monaco’s banking industry is carried out by the French financial supervisory authority*.
Although Monaco is not a member of the European Union, its official currency is the Euro and it is, through France, practically part of the Schengen area. The airport closest to Monaco is the international airport of Nice, approximately 30 kilometres away.
Monaco does not levy personal income tax (income and capital gains are fully exempted) or wealth tax. Only French nationals moving to Monaco cannot enjoy this benefit. Monaco only levies corporate tax on industrial or commercial activities in Monaco if at least 25% of their turnover results from operations that are conducted directly or indirectly outside Monaco, and it levies corporate tax on licensing activities with respect to assets such as trademarks and copyright. This means in practice that single-family offices can provide their services exempt from corporate tax**.
For many years already, Monaco and France form a customs union and Monaco has adopted the French Value Added Tax (VAT) regime with only minor amendments. VAT is levied at a rate of 20%**.
It is relatively easy for family offices to employ staff in Monaco. In practice, this does not always mean that such staff will also be living in Monaco, as apartments in Monaco are rather expensive. Although one would expect to be confronted with very high employment costs in Monaco, in fact the proximity to France and Italy provides a pool of affordable employees. Every day, thousands of employees commute from France or nearby Italy across the border to their jobs in Monaco. Contrary to France, employment laws in Monaco are extremely flexible, which means that your family office team can be easily expanded or reduced. On top of that, office space can be leased at a reasonable price.
Monaco has a strong and independent legal system. There is separation of prosecution and investigation in criminal matters, a two-tier Court structure, and avenues of appeal. Monaco acceded to the “The Hague Convention on the Recognition of Trusts”, in 2007 and the Convention came in force in 2008. As a result, your family office in Monaco can be involved in your family’s trust structures without any uncertainty in that respect.
*Source: Monaco government
**Source: The International Bureau of Fiscal Documentation. Last updated: April 2020.
Monaco’s family office licences and offerings
In 2016, the Monegasque authorities introduced regulations with respect to family offices. Until that moment, the family office sector had not been regulated. When putting in place these regulations, the Monegasque authorities decided to exempt single-family offices from regulation, and instead focussed their legislation on multi-family offices. This means that it is possible for you to establish your single-family office in Monaco without (the need to apply for) any licence.
Multi-family office licence
There are two types of multi-family office licences in Monaco: one that allows you to provide wealth planning services and coordination of wealth (asset administration), and another that allows you to also coordinate the financial affairs of clients through, among other things, the instruction of orders for financial transactions. Both licences do not, however, allow you to act as an independent asset manager. In other words, a multi-family office in Monaco is not allowed to provide investment advice and execute financial transactions. As a result, Monegasque banks and asset managers are not allowed to provide family office services in Monaco.
A multi-family office in Monaco is there to protect the interests of its clients and is therefore only allowed to be active in a monitoring, controlling and coordinating role. A multi-family office in Monaco is not allowed to receive financial compensation from anybody else than from the clients it represents. The multi- family office should have appropriate insurance coverage for its activity and is held to professional secrecy.
When you want to establish and operate a multi-family office in Monaco, you will need to apply for an administrative authorisation or, in case of instruction of orders for financial transactions, a licence of the Commission de Contrôle des Activités Financières (CCAF), the Monegasque financial regulator. Without the necessary authorisation, you are not allowed to provide multi-family office services in Monaco. You are also not allowed to use the term “multi-family office” or “MFO” for your business activity without such licence.
Source: Loi n° 1.439 du 2 décembre 2016 portant création de l’activité de multi family office.
Single-family office activity
Any activity started in Monaco needs to be approved by the government. This also applies for single-family offices, but single-family office services in Monaco are not regulated in any other respect. What is interesting, is that this exception of regulation can only be found in the law on multi-family offices in Monaco. That said, it needs to be stated that the Monaco government is very welcoming to single-family offices.
Although there is no absolute definition of a “family” in the law, it is interpreted to cover family members who are bloodline descendants of a common ancestor including their spouses.
The lack of single-family office regulations provides a lot of flexibility to families in shaping their family office in Monaco. Several high-profile billionaire families have already established their family office in Monaco. As there is no licensing obligation for single-family offices, the total number of single-family offices in Monaco is unknown.
Due to the fact that there is no personal income tax in Monaco, families can combine the establishment of a single-family office in Monaco very well with relocation of the family to Monaco. Some families that relocate to Monaco, but who already have a family office, choose to set up a second (administrative) family office in Monaco, while keeping their main family office outside of that country.
Monaco family office structures
When you intend to launch a multi-family office in Monaco, you will be required to establish a Société Anonyme Monégasque (a specific corporate form in Monaco).
In most cases, the preferred corporate form used for a single-family office in Monaco would be a Société Civile Particulière (SCP) or a Société Anonyme Monégasque (SAM). There are considerable differences between these two corporate forms. It is therefore important to obtain the support and guidance of a local Monegasque law firm in the process of setting one up.
In general, the following can be stated about these two types of companies. Depending on your structure of choice, setting up your family office entity could take several weeks to several months. The SCP has by default a civil objective, the SAM can have either a commercial or a civil objective.
Companies in Monaco with a civil objective do not pay any corporate income tax. Structures with a civil objective are also not considered VAT entities. When your single-family office in the form of a SAM would have a commercial objective, it would be a VAT entity. It would then also qualify as a corporate taxpayer. As single-family offices normally do not strive to be profitable, the corporate tax to be paid could potentially be calculated on a cost-plus basis.
Depending on the legal structure of choice, a single-family office in Monaco can hold the family assets directly itself, hold underlying assets, such as business holdings and private wealth vehicles, or only monitor and control independent entities such as trusts, manage foreign real estate and bankable assets abroad and in Monaco. You will find more about what you need to consider when setting up a single-family office on our dedicated page.