It has become common practice for financial institutions and foreign tax authorities to ask for a residence certificate for their Monaco resident clients.
To help clarify the basis on which Monaco will issue residence certificates for tax purposes to foreign national Monaco residents, Monaco has just introduced a new regulation which sets out the criteria for obtaining such a residence certificate (Ordonnance Souveraine no. 8.372 of 26 November 2020).
From December 2020, for a foreign national to make an application for the residence certificate for tax purposes, the applicant must produce the following to the Surete Publique:
- Valid Monaco residence card;
- Application form declaring that Monaco is the:
- place of principal residence of the applicant, or their ‘foyer’ (home) OR
- centre of their interests; - Justification of accommodation in Monaco (title deed, lease or licence to occupy);
- Water, electricity and telephone bills relating to the relevant year together with any other document proving residence;
- Any other documents which may be requested by the Surete Publique in relation to their enquiries.
What is ‘Principal Place of Residence’?
Borrowing heavily from the French Tax definition, the principal or habitual residence of an applicant is regarded as being Monaco:
- If the applicant stays for at least 183 days in Monaco OR
- For stays of less than 183 days, if the applicant is physically present in Monaco for a period longer than they spend in any one other country.
What is ‘Foyer’?
In considering the application for the residence certificate, the Surete Publique will only consider the place of the applicant’s ‘foyer’ if the principal place of residence of the applicant cannot be determined. This is in contrast with the position in France – where ‘foyer’ is considered first, and place of principal residence second.
With no defined guidance in Monaco as to what is meant by ‘foyer’ it is useful to look to France to see how Monaco may look to develop its interpretation of ‘foyer’ in the future.
Under French tax legislation, the ‘foyer’ of a taxpayer is the place where the taxpayer and/or his family habitually live, where the family interests are based. The term ‘habitually’ implies a certain degree of permanence. This means that the presence of the family in France must be permanent and not intermittent or occasional.
For a ‘foyer’ to be characterized, two conditions must be satisfied: the centre of family interests (where the family interests are based) and the place where the taxpayer normally lives (the taxpayer must normally live with his wife/family).
Under French case law partners equate to spouses when determining the location of the foyer. For single taxpayers, courts have stated that single taxpayers can have a foyer but for them the foyer is not where the family habitually lives but where they conduct their personal life.
What is ‘Centre of Interests’?
If the applicant does not satisfy the tests of principal place of residence or foyer and wishes to rely on the ‘centre of interests’ option to obtain the residence certificate, they must demonstrate that Monaco is the place:
- Where the applicant has made their principal investments;
- Where their business activities have their head office or place of effective management;
- From where they administer their assets.
For some Monaco residents, it may be straightforward to evidence any (or all) of these tests, but for others with varied global interests or travels, it may not be so easy. We are happy to help navigate any interpretative or practical issues arising from these new rules.
No action should be taken on the basis of this note, nor should it be construed as amounting to tax, legal or VAT advice. Suitable, specific and professional advice should always be obtained in respect on any particular issue.
