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10.1. Specific Incentives

Monaco provides for two main incentive regimes, a tax holiday for newly formed companies and an R&D tax credit. The following outlines the two main regimes:

New Company Tax Holiday

Subject to certain conditions, new companies formed in Monaco are eligible for a corporate tax holiday for the first 2 years of operations. In addition, the taxable base of new companies subject to corporate tax is reduced in subsequent years at the following rates:

  • 25% of the taxable base in the 3rd year;
  • 50% of the taxable base in the 4th year; and
  • 75% of the taxable base in the 5th year.

From the 6th year, the corporate tax is computed at 100% of the taxable base.

Research and Development Tax Credit

Monaco provides a tax credit of 30% of a company's annual operations expenditure related to R&D. The 30% credit is limited to EUR 100 million in expenses, with a 5% credit on expenses over the limit which is capped at EUR 10 million.

In cases where a taxpayer has not taken advantage of the R&D credit for 5 or more years, the credit available will be increased to 40% for the first year in which it is used and 35% in the second year.

Effective 1 January 2021, the tax credit is limited to 50% of the corporate tax due by a company for the year in which the R&D expenses are incurred. Any excess credit can be carried forward for up to 5 years, subject to the 50% limit for each year. However, the unused portion of the credit available at the end of the 5-year period would lapse and cannot be carried forward.

Further, excess R&D tax credit recorded for the last fiscal year starting prior to 1 January 2021 is also subject to the 50% limit in the following years but can be carried forward for an unlimited period.