Walking through the districts where rich people “live”, you frequently get the disconcerting sensation that there are few actual human beings around you. Lawn sprinklers pivot, traffic lights change but direct no cars, air conditioning hums. No voices are heard, save the mutters of a few gardeners who have the unobtrusive air of those without valid working papers.
I spent several years commuting once a month to Palm Beach, and in the off season, on “the island”, I felt as if I had a part in one of those post-apocalyptic movies where most of humanity has been wiped out by neutron bombs or aliens.
This is a problem for local business people and service providers, who have to try to charge enough during the fashionable months to offset longer times of no store traffic or hourly employment. Generally, though, the authorities don’t care about the particular interests of Aspen interior decorators or seventh arrondissement traiteurs.
Not so in Monaco. The rich people’s district is the entire country. Of the 36,000-odd residents, only about one in five is a citizen, but the principality is run for their benefit. That includes not just the Monégasque asset managers and lawyers, but the plumbers, pharmacists, and so on. If the non-citizen resident property owners aren’t there, many of the citizens aren’t being paid.
So, unusually among tax-advantaged upscale locales, Monaco requires those who claim residency to actually live there for a substantial fraction of the year. It’s not enough to put up the minimum €1m for the pied-à-terre and half million in the bank. For the first 10 years of “temporary” and then “ordinary” residence status (carte de séjour), your physical presence is required for at least three months a year, though the days can be non-sequential.
For the comfort of “privileged” residency status, which you can apply for after 12 years of continuous residency, you must commit to at least six months a year in Monaco. Then your carte de séjour becomes valid for 10 years, and you don’t face the risk of being delivered back to Italy or Russia.
Spending three to six months of the year in Monaco may not seem a bad fate but don’t underestimate the travel commitments, or wanderlust, of people with money. The good news is that you are not charged income tax, inheritance tax or wealth tax, though there is a 19.6 per cent value-added tax on your local purchases.
Bettina Ragazzoni, of KPMG GLD et Associés in Monaco, says it’s not just a tax-advantaged address but “a natural economic meeting centre for conferences and professional fairs, with hotels that allow for the catering of a high-end clientele”. Nice airport is close enough to count as a local facility, and has quite good international connections.
You can use the belle époque streets and parks of the Carré d’Or as your exercise yard but remember that Monaco is only 2 sq km of land. Day trips in and out of neighbouring France and Italy are possible, but you’d better be happy as a stay-at-home rich person. A committed Monaco life is probably best suited to couples with young children, as the school system and security are among the best in Europe.
Americans are liable for federal tax on their worldwide income whether or not they’re in the country, so the ones in Monaco are there for work or lifestyle, not tax advantage. French nationals also have no tax breaks from Monaco residency.
The authorities are serious about the physical residency requirements for the carte de séjour. After all, one of the attractions of the principality is a crime rate that is the lowest in the world. Given the atmosphere in the surrounding south of France, that means an intense police presence and real-time surveillance. So the Monégasques know who is where.
As one long-time Monaco resident says, “They are getting tougher on residency, and they really check. They look at your electric bill to see how much you are using, and when. Some used to hire people to turn lights off and on, but if they don’t see you on their cameras, they can find out everything from your concierge. They don’t have to give a reason if they don’t want to renew your carte de séjour.” Then it’s back to Milan or Moscow.
Even so, the Monaco property market has been picking up momentum. Part of that is a greater realism on the part of sellers, who have been lowering prices to meet the market. There has also been a higher level of buyer interest since last autumn, when the eurozone crisis led to a realisation that tax rates and collections are going to rise. In the past, for example, having an Italian passport without exit and entry stamps proving you were there, or any other paper trail, was enough to avoid the fisc. Now you need proof you’re actually living elsewhere.
If elsewhere is Monaco, just make sure you are prepared to sit more or less still for at least 90 days a year.