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9.1. Unilateral and Treaty Based Methods Available for the Elimination or Mitigation of Double Taxation

Under the current tax system, foreign-source business income is exempt (territoriality principle). Where the foreign income is taxable in Monaco (as is the case for example for passive income not attributable to a foreign business establishment), a credit for foreign taxes is allowed. No foreign tax credit is granted on qualifying dividends under the participation exemption (see Sec. 5.1.). Domestic and foreign dividends are only partially subject to the corporate tax if the Monaco (stock) companies own at least 20% of the capital of the distributing companies for at least 2 consecutive years at the date of distribution. The taxable portion is:

  • 20% for participation lower than 35%;
  • 10% for participation of 35% or more but less than 50%; and
  • 5% for participation of at least 50%.

Below is a summary of the available methods for various income tax streams based on domestic law.

Royalty Copyright OC
Capital Gains OC
Dividends NC
Interest OC
Royalty Patent OC
Sales OC
Service Management OC
Service Technical OC
Royalty Trademark OC

The credit column shows the type of foreign tax credit granted when the receiving country receives a payment.  Four abbreviations are used for the type of foreign tax credit available:

  • NC means no credit but foreign withholding taxes can be deducted.
  • OC means ordinary credit, i.e., credit for foreign withholding taxes (e.g., withholding taxes).
  • IC means indirect credit, i.e., credit for underlying corporate taxes as well as foreign withholding taxes.
  • ND means no credit and no deduction for any foreign withholding taxes incurred.