Monaco, a Mediterranean microstate of about 2 square kilometers and 38,857 residents, has no personal income tax. It was abolished in 1869 — the second year of Japan's Meiji era. The money came from the casino. For more than 150 years since, Monaco has kept its income tax at zero, with exactly one exception: the French. French nationals living in Monaco still pay income tax to France. How did a tax system that splits by nationality come about? From the 19th century when the casino fed the country, through the 1962 Franco-Monegasque crisis in which President de Gaulle went as far as sealing the border, to today, when value added tax makes up 50.3% of state revenue — we sort out the machinery and the money flows of the "country with no taxes" from primary sources. We also explain why Japanese nationals who move to Monaco cannot easily escape Japanese taxation.
How it works: what is zero, and what is still taxed
Let us first test the popular claim that "Monaco has no taxes" against the Monegasque government's official information. What is zero is mainly direct taxation of individuals; indirect taxes very much exist.
| Tax | Treatment in Monaco |
|---|---|
| Personal income tax | None (since Charles III's 1869 ordinance — but the French are an exception, see below) |
| Wealth tax, property tax, residence tax | None (nothing is taxed merely for being owned) |
| Inheritance and gift tax | Applies only to assets located in Monaco. The rate depends on the relationship: 0% for spouses and direct line (parent-child), 8% between siblings, 10% for uncles, aunts, nephews and nieces, 13% for other relatives, 16% for non-relatives |
| Value added tax (equivalent to Japan's consumption tax) | Yes. Levied on the same basis and at the same rates as France (standard rate 20%) |
| Business profits tax (ISB) | Yes, conditionally. A 25% rate applies to companies earning more than 25% of turnover outside Monaco (from financial years starting in 2022; the rate was 33.33% before 2018 and has been reduced in stages) |
- The business profits tax (ISB) is the only direct tax collected in Monaco. It targets only companies engaged in commercial or industrial activity that derive more than 25% of turnover from outside Monaco; business conducted entirely within Monaco is in principle untaxed
- "No personal tax on the salary you earn, the profits of your business, or your dividends" — this is the single biggest reason the world's wealthy gather in Monaco. That said, housing prices are said to be the highest in the world: taxes are low, but living costs are the most expensive anywhere
Why it exists: the casino fed the country in 1869
Monaco's zero income tax was born not from ideology but from casino revenue.
- 1863 — An ordinance of Charles III establishes the Societe des Bains de Mer (SBM, the Sea Bathing Society), and the businessman Francois Blanc is granted a 50-year gambling monopoly for 1.7 million gold francs. Blanc, who had made a success of the casino at the German spa town of Bad Homburg, put the Monte Carlo casino on a sound footing
- 1868 — The railway from Nice reaches Monaco, and wealthy visitors pour in from across Europe. Casino revenue expands rapidly and the treasury fills up
- 1869 — Charles III abolishes income tax (direct taxation) on residents by ordinance. The state can now support itself from the casino without taxing its people
"Let the casino's customers pay, and tax the residents not at all." By the end of the 19th century, casino-related income is said to have accounted for the bulk of state revenue. The casino district was named "Monte Carlo" (Charles's mountain) after the prince who drove its development, and together with the zero income tax it turned Monaco into a playground for the rich. Note that Monegasque nationals are still legally barred from entering the casino to gamble. The casino is, by design, a device for taking money from foreigners.
Result 1: an angry France — the 1962 crisis and "only the French are taxed"
When a country with no income tax sits next door, people and assets flow in from the high-tax neighbor. As wealthy French citizens moved their residence to Monaco to escape their tax burden, the French government under President de Gaulle hardened its stance in 1962. Treating Monaco as, in effect, a tax haven for the French, Paris is reported to have gone as far as setting up customs checkpoints and pressuring the principality with a border blockade. A microstate dependent on France for electricity, water and customs clearance had no room to resist, and after negotiations the Franco-Monegasque tax convention was signed on May 18, 1963.
| Main provisions of the convention | What it means |
|---|---|
| Article 7: French nationals who cannot prove they had lived in Monaco for five years as of October 13, 1962 are subject to French income tax as if they were French residents | In other words, French nationals who moved to Monaco on or after October 13, 1957 pay income tax to France even while living in Monaco. Only long-established residents from before that date are exempt |
| Articles 1-2: Monaco creates a profits tax (ISB) on companies earning more than 25% of turnover abroad | Closes the loophole of putting a paper company in Monaco while doing business abroad. The ISB described above is a product of this convention |
- This "1957 rule" is still alive. The French tax authorities continue to tax French nationals resident in Monaco on the basis of this convention
- Inheritance tax is governed by a separate Franco-Monegasque convention of April 1, 1950, which allocates taxing rights between the two countries
- The result is a structure that is rare anywhere in the world: those who can enjoy Monaco's zero income tax are "foreign residents who are not French, plus Monegasques". Italians, Britons and Japanese can all qualify, yet the neighboring French alone are excluded — the balance of power in 1963 is still carved into the tax system more than 60 years later
Result 2: today's revenue — 50.3% is VAT, and the casino is a sliver
The question "can a state really function without income tax" is answered by official data from Monaco's statistics office (IMSEE). In 2025 Monaco's state revenue was 2.4647 billion euros (about 440 billion yen), with a surplus of 179.7 million euros. The breakdown is as follows.
| Revenue item | Amount (2025) | Share |
|---|---|---|
| Value added tax (TVA) | 1.2391 billion euros (about 220 billion yen) | 50.3% |
| Registration and recording duties (property transfer taxes etc.) | 334.1 million euros | 13.6% |
| Business profits tax (ISB) | 306.5 million euros (about 55 billion yen) | 12.4% |
| Income from state-owned property (rents, parking) | 280.8 million euros | 11.4% |
| Financial income | 95.3 million euros | 3.9% |
| Monopoly concession fees (SBM including the casino, telecoms, electricity and gas, the port) | 62.6 million euros (about 11 billion yen) | 2.5% |
| Other (customs duties, tobacco, stamps etc.) | 146.4 million euros | 5.9% |
- The largest pillar is value added tax. Monaco is in a customs union with France and levies VAT at the same rates as France. Income goes untaxed, but money spent in Monaco carries a 20% tax — in a country packed with ultra-luxury hotels, restaurants and property transactions, that is a powerful revenue source
- The casino, which once accounted for most of state revenue, now sits inside "monopoly concession fees" that together make up 2.5% of revenue. The era of the casino state is long over; today consumption, real estate and companies keep Monaco going. SBM remains a state-strategic company in which the state holds 64.2% of the capital, and with 4,436 employees it is Monaco's largest employer
- The state has built up a constitutional reserve fund (FRC) worth 8 billion euros (about 1.4 trillion yen) at the end of 2025 — sound public finances with savings worth more than three years of revenue
Residency and tax haven criticism: the hurdles to living there, and international rules
Monegasque residency (a residence permit) is not something you buy; you apply through an official government procedure. There are three main conditions.
- Accommodation — Secure a home in Monaco (purchase, rental, or living with family). With housing prices in roughly 2 square kilometers said to be the highest in the world, this is in practice the biggest hurdle
- Financial resources — Prove "sufficient means of living" with a bank certificate on the prescribed form issued by a bank in Monaco, an employment contract, business registration or similar. There is no officially prescribed minimum, but in banking practice a deposit on the order of several hundred thousand euros is said to be the benchmark
- Record — Submit a criminal record certificate (issued within three months) from every country you have lived in over the past five years. Nationals of countries outside the EEA (European Economic Area) — including Japanese nationals — must first obtain a French long-stay visa (type D) before applying. The initial issuance fee is 80 euros
As for the criticism that Monaco is a "tax haven," its international treatment has been changing. Monaco was listed by the OECD in the 2000s as one of the "uncooperative tax havens," but it shifted to accepting exchange of tax information and was removed from the list in 2009, then signed an agreement with the EU on the automatic exchange of financial account information in July 2016. Under the OECD's Common Reporting Standard (CRS), information on Monegasque bank accounts is sent automatically each year to tax authorities in other countries. Monaco does not appear on the EU's current list of non-cooperative jurisdictions for tax purposes. Not "a country where you can hide an account" but "a transparent country with unusual tax rates" — this is the survival strategy Monaco chose under international pressure. The same pattern is examined in detail in the UAE's corporate tax and the end of the tax haven.
What this means for Japanese residents: move to Monaco, and Japanese tax follows you
"Live in Monaco and pay zero tax" does not hold as stated for Japanese nationals, because Japanese taxation does not end simply because you cancel your resident registration.
- Whether you count as a non-resident is decided by your "base of living." Under Japan's Income Tax Act, resident or non-resident status is judged by objective facts about where your base of living is, not by your resident registration. If your family lives in Japan and your main assets or business are in Japan, you may be taxed as a Japanese resident on your worldwide income even while renting a flat in Monaco
- The exit tax on departure. If you leave Japan holding shares and similar assets with a total market value of 100 million yen or more, income tax applies to unrealized gains even though you have not sold (introduced in 2015; payment can be deferred for up to 10 years by providing security). Note that the international tourist tax (3,000 yen from July 2026), colloquially also called a "departure tax," is an entirely different tax
- Inheritance tax has a "10-year rule." If either the deceased or the heir (a Japanese national) had an address in Japan within 10 years before the inheritance began, all assets including those abroad are subject to Japanese inheritance tax. Even though Monaco has no inheritance tax for spouses and the direct line (0%), the design means you cannot escape Japanese inheritance tax until the whole family has lived abroad for 10 years
In short, "saving tax by moving to Monaco" is a long-term matter involving the size of your assets, your family situation and the reality of your life after moving — it does not come easily. For the reverse case, the tax rules when wealthy foreign nationals move to Japan, see wealthy foreign nationals moving to Japan and taxes. Cross-border taxation is a specialist field involving residency determination, tax treaties and exit taxation. Always consult a tax accountant well versed in international taxation before acting. This article does not recommend relocation or tax-saving schemes; it explains a system and its history.
What to do today
What to do today
- When you see a claim that "country X has zero taxes," get into the habit of asking which tax is meant (income tax, inheritance tax, consumption tax, corporate tax) — Monaco still has 20% VAT and a 25% profits tax on companies
- Roughly total the market value of the shares and investment trusts you hold, and see how far you are from the 100 million yen threshold for the exit tax
- If there is even a chance of moving abroad or of an inheritance involving foreign assets, consider consulting a tax accountant who handles international taxation before you start
FAQ
Q. If I move to Monaco, does anyone get zero income tax?
A. Monaco has no personal income tax, so foreign nationals who obtain proper residency status in principle bear no Monegasque income tax. French nationals, however, pay income tax to France under the 1963 Franco-Monegasque tax convention if they moved on or after October 13, 1957. And for Japanese nationals, Japanese taxation continues unless you are recognized as a non-resident of Japan, so moving does not automatically make it zero.
Q. With no income tax, how do Monaco's public finances work?
A. According to Monaco's statistics office, 50.3% of the roughly 2.46 billion euros of state revenue in 2025 came from value added tax at the same rates as France (standard 20%). Other sources include property-related registration duties at 13.6%, the profits tax (25%) on companies earning more than 25% of turnover abroad at 12.4%, and income from state-owned property at 11.4%. In 2025 there was again a surplus of about 180 million euros.
Q. Is the casino still Monaco's source of income?
A. No. Monopoly concession fees, including those from SBM which runs the casino, were only 2.5% of revenue in 2025. Casino-related income is said to have accounted for the bulk of state revenue at the end of the 19th century, but today's pillars are value added tax, real estate and taxation of companies. Monegasque nationals are legally barred from gambling in the casino.
Q. Is Monaco on a tax haven blacklist?
A. Monaco does not appear on the EU's current list of non-cooperative jurisdictions for tax purposes. It was listed among the OECD's uncooperative tax havens in the 2000s, but was removed in 2009 and signed an agreement with the EU on automatic exchange of financial account information in 2016. Account information is exchanged automatically with tax authorities under the Common Reporting Standard (CRS).
References (sources)
* Figures are based on materials published as of August 2026. Yen conversions use an approximate rate of 1 euro = 180 yen. Monaco's revenue breakdown follows IMSEE's "Focus Finances publiques 2025" (published May 2026). This article provides information on a system and its history and is not a recommendation to relocate or to save tax. For individual tax decisions, consult a tax office or a tax accountant well versed in international taxation.
