Monaco takes the step toward global minimum taxation

The filing of this bill comes as no surprise to informed observers of international taxation. Since the launch of the BEPS (Base Erosion and Profit Shifting) project under the auspices of the OECD and the G20, Monaco has engaged in a continuous process of alignment with international standards on transparency and the fight against base erosion.

The Principality had already adopted several measures in this regard, notably concerning the automatic exchange of information.

Bill No. 1129 is a direct continuation of these reforms and constitutes the legislative implementation of Pillar 2 of the OECD/G20 Inclusive Framework, which establishes the principle of a global minimum effective tax rate.

The text does not apply to the entire Monegasque economic fabric.

Its scope is strictly defined: only constituent entities located within the territory of the Principality that belong to a multinational enterprise group with consolidated annual revenues of at least €750 million are covered.

This threshold must be met for at least two of the four fiscal years preceding the year in question.

This calibration, in line with the parameters adopted by the Inclusive Framework, effectively excludes small and medium-sized enterprises as well as purely domestic groups, and focuses the mechanism on large-scale structures that could be subject to a top-up tax abroad.

The core of the bill lies in the establishment of a qualified domestic minimum top-up tax — known as QDMTT (Qualified Domestic Minimum Top-up Tax) in international terminology. The mechanism operates as follows: when the effective tax rate borne by the entities of a multinational group located in Monaco is below 15%, a top-up tax is levied by the Principality itself to close the gap.

The bill adopts what is described as a "limited" approach, meaning it focuses on the domestic collection of this top-up tax, without implementing at this stage the Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR) provided for under Pillar 2.

The strategic interest of this bill goes far beyond mere technical compliance. In the absence of such a domestic mechanism, foreign jurisdictions in which the parent entities or other constituent entities of the relevant groups are established would be entitled, under the Pillar 2 rules, to collect a top-up tax themselves on profits earned in the Principality.

In other words, legislative inaction by Monaco would directly result in a transfer of tax revenues to other States. By establishing its own qualified mechanism, the Principality ensures that the supplementary tax burden remains collected within its territory, thereby preserving its sovereignty over public revenues.

The Monegasque Government's choice reflects a pragmatic and graduated approach. Rather than transposing the entire Pillar 2 architecture, Monaco opts for a targeted compliance approach, reconciling its international commitments with the specificities of its legal and fiscal order.

The bill expressly leaves open the possibility of introducing further developments should the international framework change or national interest so require. This deliberate flexibility demonstrates a determination not to freeze the mechanism in place, while meeting the minimum requirements set by the international community from the outset.

For multinational groups established in the Principality, this approach offers a clear and predictable framework, without an abrupt break from the existing tax environment.

The bill provides for the provisions to enter into force for fiscal years beginning on or after 31 December 2026. However, the first filing obligations and the first payments of the top-up tax are not expected until 2029, giving the relevant companies and the Monegasque administration a reasonable preparation period.

This timeline, consistent with the deadlines adopted in other jurisdictions, will nevertheless need to be closely monitored by the tax departments of the affected groups, which will need to plan ahead for compliance work, particularly regarding the collection of data required to calculate the effective tax rate by jurisdiction.