France-Monaco tax treaty: why French nationals in Monaco pay tax in France

The French nationals Article 7 ties to France

• The principle. French nationals who move their domicile or residence to Monaco, or who cannot show five years of habitual residence in Monaco on 13 October 1962, are taxed in France as if they were domiciled there. In practice, every French national who arrived after 13 October 1957 is caught; those already resident before that date who have stayed without interruption are treated as domiciled outside France. The country of departure does not matter: a French national arriving from London or Geneva is caught just like one leaving Nice.
• French nationals born in Monaco. The Conseil d'État reversed its earlier position and held that French nationals who have lived in Monaco continuously since birth never "moved" their domicile there and fall outside Article 7 (CE, 11 April 2014, No. 362237). The tax authorities apply the same solution to a French national born in France who immediately joined the parents' home in Monaco.
• The exceptions in the text. Persons belonging to or attached to the Sovereign Household, and civil servants, officers and employees of the Principality's public services who established their habitual residence there before 13 October 1962, are excluded.
• Spouses and children (exchange of letters of 26 May 2003). Article 7 creates no French taxing right beyond French domestic law for, in particular, a French national married to a Monegasque national or to a French national who is outside Article 7, who has kept habitual residence in Monaco since the marriage and is not taxed separately; a surviving spouse in the same situation; and a minor child who has lived since birth in the home of such a parent in Monaco. For a French national married to a person of another nationality, the marriage must predate 1 January 1986: the 2003 text refers only to a French woman, but the tax authorities apply this exception to French nationals without distinction. Divorce ends the exception; the spouse's death does not.
• Dual nationals. For treaty purposes, a French-Monegasque national is treated as holding Monegasque nationality only. For other dual nationals, the administrative guidelines allow an exclusion only for arrival in Monaco before 29 December 1995, with conditions that vary with the arrival date, continuous residence since then and supporting documents filed by 31 December 1996. A dual national settling in Monaco today is therefore caught by Article 7, and losing the foreign nationality ends the exception.
• Evidence. Residence is proven by the Monegasque certificate of domicile, valid for three years and renewable, or by any means (CE, section, 5 October 2007, No. 292388). Any break in residence forfeits the certificate. Even with a valid certificate, a French national whose main professional activity or centre of economic interests is in France becomes taxable in France under Article 4 B of the French tax code.

Five decisions on residence in Monaco and its consequences

The 1963 treaty is short. The tax authorities apply it with their guidelines and the Conseil d'État reads it strictly. These five decisions come up in the firm's files.

• French national born in Monaco. A French national who has always lived in Monaco since birth never moved their domicile there: they are outside Article 7. The argument of discrimination against foreign nationals in Monaco, whom France does not tax as residents, is ineffective under Article 14 of the European Convention on Human Rights (CE, 11 April 2014, No. 362237, published in the Lebon collection).
• Spouse of a French national outside the rule. A French national married to a French national whom Article 7 does not cover (here a French woman born in Monaco and always resident there), who has kept habitual residence in Monaco without interruption since the marriage and is not taxed separately, cannot be taxed in France on income not of French source where domestic law does not allow it (CE, 30 December 2014, No. 362245).
• Proof of residence. A French national who settled in Monaco before 13 October 1957 may prove continuous residence by any means, without being required to produce a certificate of domicile (CE, section, 5 October 2007, No. 292388, published in the Lebon collection).
• Social levies. Article 7 covers income tax only: it is no basis for CSG, CRDS or the other social levies, but it does not prevent them being assessed if the French national in Monaco is domiciled in France under Article 4 B of the tax code (CE, 11 June 2014, No. 358301).
• Real estate gains. A French national in Monaco caught by Article 7 but not domiciled in France under Article 4 B is taxed to income tax on the gain from selling a property located in France under Articles 150 U et seq. of the tax code, and bears social levies (CE, 21 June 2021, No. 439354).

The exit tax depends on nationality, not on the Monegasque address

• The French national. The notice to form 2074-ETD states that, for a person of French nationality, moving their domicile to the Principality of Monaco is not a transfer of tax domicile out of France. For one caught by Article 7, the reason lies in the text: the exit tax of Article 167 bis of the tax code requires a transfer of tax domicile out of France, deemed to occur on the day the taxpayer ceases to be subject in France to a tax obligation on all their income (III of the article). Article 7 of the treaty keeps them taxable in France on all their income, as before departure: there is no transfer, so no exit tax. A French national settling in Monaco is not caught by Article 167 of the tax code either (BOI-IR-DOMIC-20, para. 200).
• Other nationalities. A person who is not French and who was domiciled in France for at least six of the previous ten years transfers their tax domicile to Monaco if they no longer meet any criterion of Article 4 B. The exit tax then applies to shares and securities whose overall value exceeds EUR 800,000, or which represent at least 50% of a company's profits (Article 167 bis, I). Payment deferral is automatic where the destination State has concluded with France the required administrative assistance and recovery conventions and is not a non-cooperative jurisdiction (IV); the notice to form 2074-ETD for 2026 lists Monaco among those States. The firm checks the list as at the departure date in each file.
• Relief. The deferred tax on latent gains is automatically cancelled if the securities are still held two years after the transfer, or five years where their overall value exceeded EUR 2.57 million on that date (VII, 2). A sale before then makes the tax payable, limited to the gain actually realised (VIII). See our exit tax guide for the mechanism and the filing calendar.

The rules governing business relations

• Monegasque profits tax (Articles 1 and 2). Monaco undertook to tax the profits of businesses carrying on an industrial or commercial activity in Monaco where at least 25% of their turnover comes from operations carried out outside Monaco, directly or through an intermediary, and of companies receiving income from patents, trademarks, processes or copyright. Other Monegasque businesses are not subject to it.
• Executive pay (Article 3). For this tax, the pay of the best-paid executive or manager is deductible only if it matches actual work and is not excessive by international standards; the pay of other executives or managers cannot exceed 75% of the pay and flat-rate expenses allowed for the former.
• Payments from France to Monaco (Article 8). Fees, royalties, brokerage and commissions paid by a business taxable in France to a person resident or established in Monaco are deductible only if the business proves that the underlying commitment is genuine and does not disguise a transfer of profits. Under the former wording of the article, which also required the absence of a dependency link, the Conseil d'État refused the deduction of trademark royalties supported by an exchange of letters stating neither the duration, nor the territory, nor the parties' mutual obligations (CE, 17 June 1992, No. 74882, Innothéra): the burden of proving genuineness remains.
• Transfer pricing (Article 9). Where the conditions of dealings between a French business and a person established in Monaco are not arm's length, the transactions are restated in the accounts, with no requirement of dependency between the parties.
• Withholding tax on services. The tax authorities do not apply the Article 182 B withholding tax to sums paid to a Monegasque business subject to the Monegasque profits tax and without a permanent establishment in France; the treaty does not prevent this withholding, where its conditions are met, if the business is not subject to that tax and has no permanent installation in France.
• Credit for French residents (Article 11). Where persons domiciled in France, or caught by Article 7, pay the Monegasque profits tax, it is set against the French income tax on the same profits, capped at that tax and with no refund of any excess.
• Anti-abuse clause and mutual agreement. Since the BEPS multilateral convention, a treaty benefit is denied where obtaining it was one of the principal purposes of an arrangement, unless granting it is shown to be in accordance with the object and purpose of the relevant provisions. A taxpayer facing taxation not in accordance with the treaty must refer the case to the competent authority within three years of the first notification (Article 24); failing agreement between the administrations, either State may refer the matter to the joint consultative commission of Article 25, which proposes a solution.