Tax Residency in Monaco for French Nationals: A Potentially Relevant Strategy

Many French citizens wonder about the benefits of transferring their tax residence to Monaco. Here are some insights regarding implications for income tax (IR), real estate wealth tax (IFI), and inheritance tax.

📍 Tax residence: a French exception
The Franco-Monegasque tax treaty of May 18, 1963, states that French nationals who transfer their residence to Monaco remain subject to French income tax, unless they can prove habitual residence in Monaco for at least 5 years prior to October 13, 1962.
👉 In other words, French nationals living in Monaco cannot benefit from the income tax exemption granted to other Monegasque residents unless they have very long-standing tax status.
💰 Wealth Tax (IFI)
According to Article 7-3 of the same treaty, French nationals who moved to Monaco after January 1, 1989, remain liable for the IFI (real estate wealth tax) in France, under the same conditions as French residents.
➡️ They must therefore declare their global real estate assets if the net value exceeds €1.3 million as of January 1st of the tax year.
⚖️ Inheritance Tax: A True Optimization Lever
The treaty of April 1, 1950, states that French nationals can only be considered Monegasque residents (for inheritance tax purposes) if they have been habitually residing in Monaco for at least 5 years at the date of death.
✅ This regime can offer optimized estate planning opportunities, notably by:

Benefiting from Monaco’s more favorable inheritance tax brackets.
Leveraging case law favorable to nationals from countries with tax treaties with France that include a non-discrimination clause.
And according to a major ruling dated October 2, 2015, shares of a Monegasque SCI (real estate company) holding property in France are considered movable assets: France cannot tax them for inheritance purposes — only Monaco has jurisdiction.

✅ Conclusion: A Strategy Worth Considering
Although the advantages regarding income and wealth tax are limited for French nationals, establishing tax residency in Monaco can be highly relevant for estate planning purposes — particularly in cases of significant inheritance or structuring through Monegasque entities.

⚠️ A tailor-made analysis, taking into account family circumstances, assets, and financial flows, is essential. Guidance from a tax expert is strongly recommended.