Tax Disputes Guide in Monaco

Although there is no personal income tax in Monaco, companies and individuals may be subject to corporate income tax (CIT) and value added tax (VAT). In addition, registration duties may be due for specific deeds. As a result, tax audits are generally initiated after reviewing the returns and deeds filed with the Monaco tax authorities (MTA).

There is no formal procedure to exclude a tax audit in Monaco. However, the risk of being audited can be significantly reduced through diligent bookkeeping, strict compliance with reporting obligations and transparency in dealings with the tax authorities. Furthermore, companies and taxpayers can adopt a proactive approach towards the MTA by requesting formal positions on specific transactions. Such requests can help to ensure the tax treatment of complex transactions and thus reduce the risk of subsequent reassessment.

With regard to VAT and CIT, the statute of limitations is 3 years. This period runs until the end of the third year following the financial year during which the infringement or event justifying the reassessment occurred.

The statute of limitations for registration duties varies depending on the classification of deed (2, 3, 10 or 30 years). Note that the limitation period only starts to run from the date of registration of the deed. It is therefore essential to conduct a case-by-case analysis to determine the relevant statute of limitation.

The MTA are vested with broad investigative powers for the purpose of verifying a taxpayer’s compliance with their tax obligations.

In this regard, they can request information or documentation not only from the taxpayer directly, but also from third parties including judicial authorities and public administrations or equivalent bodies, as well as private entities such as financial institutions. Failure to comply with such a request may result in financial penalties, the amount of which varies depending on the tax concerned. Public administrations and equivalent bodies may not invoke professional secrecy.

In principle, a taxpayer must be informed in advance of any upcoming tax audit. They have the right to be assisted by an advisor of their choice throughout the process. Normal practice is that a tax inspector provides notice at least 8 days prior to an audit. However, Monaco legislation does permit a surprise audit.

The taxpayer is required to provide all requested documents and information within the timeframes stipulated by the tax authorities. Failure to comply may result in fines and penalties (astreintes).

The tax inspector must consult documents on site.

Tax penalties vary depending on the type of tax and nature of the infringement.

With regard CIT and VAT, failure to file a declaration within the deadline, as well as inaccuracy, may lead to a tax fine ranging from EUR 1-75 or EUR 15-1,500.

Any late payment of CIT or VAT may result in penalties of 3%, increasing by 1% each month (CIT) and 0.20% interest per month and a surcharge up to 80%.

Fraud or bad faith may result in additional penalties, with possible criminal charges and administrative sanctions.

Finally, failure to pay registration duties can lead to additional duties.

A taxpayer can request a reduction of penalties of the MTA, whose decision is discretionary.

Before bringing a dispute before the courts, a taxpayer is generally required to submit a tax claim to the MTA. There is no formal requirement for submitting this claim. Furthermore, it should be noted that the filing of a claim does not have a suspensive effect.

The deadlines for submitting a claim correspond to the limitation period for the refund of tax (i.e. 3 years for CIT and VAT). With regard to registration duties, Monaco tax law provides expressly that any registration duties duly levied cannot be refunded, except in limited cases.

If a dispute persists, the taxpayer may bring the case before the Tribunal de Première Instance (TPI) of Monaco.  

There are no specific legal provisions for deferral of tax payment. Consequently, taxpayers are required to fulfil their tax payment obligations even while a dispute is pending.

However, an alternative dispute resolution mechanism exists. With regard to CIT, the taxpayer or the MTA may refer the dispute to the Consultative Commission, which is an advisory body for examining disputes and providing an opinion. This procedure allows for a contradictory exchange between the taxpayer and the MTA. The Commission issues a reasoned but non-binding opinion. (However, its opinions may influence the burden of proof in subsequent proceedings.)

It is important to note that taxpayers still have the right to file a tax claim with the MTA.

There is no specialised tax court in Monaco. Tax disputes fall within the jurisdiction of the ordinary courts, namely the TPI, the Court of Appeal and the Court of Revision.

Regarding procedural timelines, Monaco tax law sets specific deadlines:

• at first instance, a party must submit their pleading within 1 month of the commencement of proceedings
• judgement must be rendered no later than 3 months from the filing of the case
• the duration of proceedings typically extends from 18-36 months
• appeals must generally be filed within 30 days from the date of the first instance judgement.

The processing of a cassation appeal before the Court of Revision should take 3-4 months.

The landscape of tax litigation has remained relatively stable in Monaco. No recent developments have had a notable impact. Most tax issues tend to be resolved at an early stage through dialogue with the MTA, thereby avoiding disputes before jurisdictions.

A well-prepared defence strategy – backed by complete documentation and proactive engagement with the MTA – is essential in managing any risk in Monaco.