General Overview. Monaco is not a classical offshore jurisdiction. In fact, it is a convenient place from a taxation point of view for private persons, however, taxation of corporate entities is not that attractive. However, even private persons are liable to pay high rates of social security contributions. Moreover, Monaco is not an attractive jurisdiction for financial organizations, such as offshore banks, offshore investment funds and offshore insurance companies. There are strict and rather big bureaucratic procedures, which together with inconvenient taxation regime and too high property prices certainly discourage entrepreneurs to establish their start-ups in Monaco. At present the financial environment of Monaco is evaluated as that, which adheres to international standards and is well regulated.

Banking Sector. The rapid development of private banking in the last 20 years can be explained by its good supervisory framework, absence of withholding tax on interests, and a particular interest of Italian citizens in choosing Monaco for cost-effective offshore banking purposes. There are many banking institutions in Monaco at present with a substantial amount of assets under management. However, starting from 2005 Monaco joined the EU’s Tax Savings Directive, in terms of which the jurisdiction introduced withholding tax on interests.  Starting from 2009, Monaco implements more transparent banking management procedures, adhering to the requirements of OECD.  Monaco also plans to implement several bank secrecy changes, following the example of Switzerland and Luxembourg. It is forecasted that these changes will result in a significant decrease in assets under management in the banks of Monaco.