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6.4. Deduction of Cross-Border Payments and Non-Deductible Expenses

The following expense types are not deductible or have limited deductibility for Monaco tax purposes:

  • Distributed dividends are not deductible;
  • Expenses such as royalties, brokerage, and commission fees paid to related parties are not deductible;
  • Any payments that are disguised profit distributions are not deductible;
  • Remunerations paid to associates and managers are partially deductible. The maximum deductible amounts for small companies (turnover below EUR 3.5 million for service providers and below EUR 7 million otherwise) are fixed periodically by the tax authorities. For other enterprises, the deduction is capped at the amount deemed not excessive in comparison with international practice, notably with EU as the principal reference;
  • Interest paid in excess of the annual average rate of interest charged by financial institutions on variable interest rate loans to enterprises with a duration exceeding 2 years;
  • Interest paid by a company to its shareholders at an interest rate exceeding 200 basis points the interest rate published by the French Central Bank is not deductible; and
  • Interest paid by a company to its direct controlling shareholders on the portion of the loan exceeding half of the amount of the share capital of the company is not deductible (see Sec. 12.2.1.).