Reminder of the provisions of the Franco-Monegasque Convention on Succession

Many Monegasque residents who own property in France are concerned about the taxation applicable to their estate.

We would like to remind you of the provisions of the Franco-Monegasque Convention of 1st April 1950 relating to inheritance.

I. Its scope of application

In principle, this agreement applies only to French and Monegasque nationals domiciled in one of these two States and precludes the provisions of French domestic law.

French nationals who had been residing habitually in Monaco for at least five years at the time of their death are considered to have been domiciled in the Principality at the time of their death.

II. Can the benefits of the Convention be extended to nationals of other countries?

The question of the enforceability of the Franco-Monegasque Convention on Inheritance was resolved by the decision handed down by the Court of Cassation in plenary session on 2 October 2015.

This decision confirmed that said Convention applies to a deceased person who is a national of a third country, provided that:

• they benefit from an equal treatment clause contained in the tax treaty signed between France and the country of their nationality, which applies to all taxes and to persons whether or not they are residents of the contracting States, and;
• they have been ordinarily resident in Monaco for at least 5 years at the date of their death.

The enforceability of the Convention to foreign nationals who had been domiciled in Monaco for more than five years on the date of their death must therefore be analysed on a case-by-case basis. If not, nationals of countries that do not have a "favourable" non-discrimination clause will not be able to claim the application of the Convention unless they invoke other legal grounds based on the Treaty on the Functioning of the European Union ("TFEU").

III.    Taxation rules

It is important to stress that unlike other conventions, the 1950 Franco-Monegasque Convention does not limit its scope to assets located in France and Monaco.

This agreement mainly allocates the right to tax inheritance assets between Monaco and France, according to the place of domicile of the deceased or the place where the assets are located, and more precisely:

• Immovable property and immovable rights are only subject to inheritance tax in the State where they are situated (art.2);
• Tangible movable property (other than ships, aircraft or those invested in a commercial, industrial or other undertaking), including banknotes and other monetary assets, may be taxed in the State where they are effectively located on the day of the death of the deceased (Art. 3);
• Tangible and intangible movable property invested in a commercial, industrial or other enterprise may be taxed in the State in which the enterprise has a permanent establishment (Art. 5);
• Shares, bonds, debts and other assets not covered by the agreement are only taxable in the State where the deceased had their "domicile" on the day of their death, if the deceased was domiciled in France or Monaco at the time of their death (art.6 a).

With regard to real estate located in France and held through a Monegasque non-trading company, the above-mentioned decision of the Cour de Cassation also confirmed that they do not fall within the scope of French inheritance tax, but are subject to the exclusive jurisdiction of the Principality of Monaco in inheritance matters, pursuant to Article 6 of the Franco-Monegasque Convention, even though the company would be considered as a company with a preponderance of real estate assets under French domestic law.

We therefore strongly recommend that individuals structure the holding of their French assets prior to their acquisition, in order to understand the implications in the event of transfer by death.