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Frequently Asked Questions (FAQ) on automatic exchange of information for tax matters

This FAQ will be updated as progress is made and the situation evolves.

General questions

What does automatic exchange of information involve?

The automatic exchange of information involves applying the Common Reporting Standard (CRS).

The CRS was developed by the OECD and approved by the G20 Finance Ministers. It is a global standard for the automatic exchange of financial account information, designed to strengthen compliance with tax rules by fighting tax evasion more effectively.

In accordance with the CRS, financial institutions will need to follow standardised procedures to record certain accounts (reportable accounts) held by individuals who, for tax purposes, are residents of reportable jurisdictions or the accounts of certain entities in which such individuals hold shares, and to report information on these accounts to the local tax authorities on an annual basis. The tax authority of each country will then send this information to the jurisdiction in which the account holder is considered to be resident for tax purposes and with which it has concluded a competent authority agreement and consequently is obliged to share such information.

To engage in automatic exchange of information, countries must put in place the appropriate operational processes and formats, as well as a legal framework authorising this type of exchange, such as a bilateral or multilateral agreement or, in the case of the EU, a directive.

The Principality of Monaco has worked to put in place the necessary legislation to move ahead with automatic exchange in 2018, as it has committed to do with both the European Union and the OECD.

More than 100 jurisdictions will automatically exchange information based on the CRS in 2018.

Why and how has the Principality of Monaco committed to implementing automatic exchange of information?

Since his accession speech in 2005, H.S.H. Prince Albert II has confirmed Monaco’s determination to increase transparency with regard to tax matters. To this end, since 2009 Monaco has been committed to concluding agreements, which meet the standards developed by the OECD. The country has continued to make progress in strengthening the efforts to combat tax evasion and fraud implemented by the OECD World Forum and the European Union.

At the OECD World Forum on 5 November 2013, the Principality announced its commitment to signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC), the legal basis for Automatic Exchange of Information (AoEI). Monaco signed the agreement on 13 October 2014.

In addition to the Multilateral Convention, the OECD World Forum established a new document, the Multilateral Competent Authority Agreement for the Automatic Exchange of Financial Account Information (MCAA), designed to facilitate automatic exchange between signatories. With a view to becoming part of the movement towards strengthening international cooperation on tax matters and demonstrating the country’s willingness to comply with the leading international standards in this area, Monaco signed this Agreement on 15 December 2015.   

At the European level, Monaco signed the Amending Protocol to the "Agreement between the European Community and the Principality of Monaco providing equivalent measures to those of the Council Directive 2003/48/CE" on 12 July 2016. This Protocol repeals and replaces the 2005 agreement between Monaco and the EU on the taxation of savings and brings the new Agreement into line with the Common Reporting Standard, in order to enable automatic exchange of information between EU member states and Monaco.

Following the ratification of the three above-mentioned agreements and conventions (the MAAC, the MCAA and the EU Protocol) in December 2016, automatic exchange of information entered into force in Monaco on 1 January 2017.  This means that Monaco will undertake the first automatic exchange of information with the participating jurisdictions in 2018, based on information from the year 2017.

What changes can you expect?

Residents of Monaco only:

  • No information regarding your accounts held in Monaco will be exchanged; as part of automatic exchange of information
  • Monaco will receive information about any accounts you hold in countries participating in automatic exchange of information with Monaco. This data may be used for income tax purposes and will be subject to a statutory period of limitation. During this period, the data will be stored under optimal security conditions, which meet the highest international standards. The IT system has been deemed compliant by the OECD after their security audit.

Residents of a state with which Monaco has agreed to exchange information:

  • Information about any financial accounts you hold in Monaco (see question about reportable financial accounts ) will be sent to the tax authorities of your country or countries of residence

Which jurisdictions should be considered as reportable jurisdictions for Monaco with respect to automatic exchange?

For 2018, reportable jurisdictions are:

  • The member states of the European Union (EU) and Gibraltar, as part of the Amending Protocol to the "Agreement between the European Community and the Principality of Monaco providing equivalent measures to those of the Council Directive 2003/48/CE" negotiated between Monaco and the EU
  • Jurisdictions which have signed the Multilateral Competent Authority Agreement (MCAA) for the Automatic Exchange of Financial Account Information, relating to the automatic exchange of financial account information and with which the Principality of Monaco has agreed to exchange information automatically 

The list of reportable jurisdictions, is published by ministerial decree and updated as new reportable jurisdictions emerge.

Reportable from 2018:

Added by the Arrêtés Ministériels:

  • n° 2016-784 of 20 December 2016 published  23 December 2016
  • n° 2017-236 of 10 April 2017 published  14 April 2017
  • n° 2017-867 of 18 December 2017 published 22 December 2017
  • n° 2018-33 of 12 January 2018 published 19 January 2018
1. Andorra 18. Italy
2. Austria 19. Japan
3. Belgium 20. Latvia
4. Bulgaria 21. Liechtenstein
5. Cyprus 22. Lithuania
6. Croatia 23. Luxembourg
7. Czech Republic 24. Malta
8. Denmark 25. Mauritius
9. Spain 26. Mexico
10. Estonia 27. Netherlands
11. Finland 28. Poland
12. France 29. Portugal
13. Germany 30. Romania
14. Gibraltar 31. Slovakia
15. Greece 32. Slovenia
16. Hungary 33. Sweden
17. Ireland 34. United Kingdom

Reportable from 2019 :

Added by the Arrêté Ministériel n° 2018-788 of 31 July 2018 published 3 August 2018

35. Guernsey 38. Indonesia
36. Jersey 39. Norway
37. India 40. Switzerland

Countries added to the list following the publication of the Arrêté Ministériel n°2018-1007 of 29 october 2018 on 2nd November 2018

41. South Africa 52. Iceland
42. Saudi Arabia 53. Isle of Man
43. Argentina 54. Malaysia
44. Australia 55. New Zealand
45. Azerbaidjan 56. Panama
46. Brazil 57. Russian Federation
47. Canada 58. San Marino
48. Chile 59. Seychelles
49. China 60. Singapore
50. Faroe Islands 61. South Korea
51. Greenland 62. Uruguay

Which jurisdictions should be considered as Monaco’s partner jurisdictions with regard to automatic exchange?

In addition to reportable jurisdictions, partner jurisdictions are those with which Monaco has begun negotiations on moving to automatic exchange.

A partner jurisdiction is not yet a jurisdiction with which Monaco has undertaken to exchange information.

The purpose of the list of partner jurisdictions is to enable Monegasque financial institutions to apply simplified due diligence procedures when their clients are residents in these jurisdictions.

The list of partner jurisdictions is published by ministerial decree and is updated as new jurisdictions become partners.

To date (last updated on 2 November 2018 2018), in addition to reportable jurisdictions, the partner jurisdictions in Monaco which are not yet reportable or non-reciprocal (cf. infra) are the following:

1. Anguilla 13. Kuwait
2. Bahamas 14. Lebanon
3. Barbados 15. Montserrat
4. Bermuda 16. Nauru
5. British Virgin Islands 17. Pakistan
5. Brunei Darussalam 18. Saint Kitts and Nevis
7. Cayman Islands 19. Saint Vincent and the Grenadines
8. Colombia 20. Samoa
9. Cook Islands 21. turks and Caicos Islands
10. Curaçao 22. United Arab Emirates
11. Hong Kong 23. Vanuatu
12. Israel  

Which jurisdictions should be considered as "non-reciprocal" jurisdictions with regard to automatic exchange?

Pursuant to the new Article 2 bis inserted in the amended Arrêté Ministériel No. 2016-784 of 20 December 2016, "non-reciprocal" jurisdictions are jurisdictions which committed to send information to countries engaged in the automatic exchange of information but not willing to  receive in return  information on the financial activities of their residents in a partner state, Monaco in this case.

To date (last updated on 2 November 2018), beyond the reportable jurisdictions and partner jurisdictions, the "non-reciprocal" jurisdictions in Monaco are as follows:

Added by the Arrêté Ministériel n° 2018-1007 of 29 October 2018 published 2 November 2018

1. Bahamas 5. St. Kitts and Nevis
2. Bermuda 6. Samoa
3. British Virgin Islands 7. United Arab Emirates
4. Cayman Islands  

 

What types of information will be exchanged?

The following types of information must be exchanged as part of the Common Reporting Standard for all reportable accounts:

  1. Name, address, tax identification number (TIN), date and place of birth [1]  (in the case of an individual)
  2. Account number
  3. Name and identifying number of the reporting financial institution

Depending on the type of account, other financial information should be reported:

All accounts The balance or value entered in the account at the end of the relevant calendar year or, if the account was closed during the year, information that the account was closed
Custodial accounts

The balance or value entered in the account at the end of the relevant calendar year or, if the account was closed during the year, information that the account was closed

The total gross amount of interest, dividends and other income generated with respect to the assets held in the account, paid or credited to the account during the calendar year

The total gross proceeds from the sale or redemption of financial assets paid or credited to the account during the calendar year, with respect to which the reporting financial institution acted as a custodian, broker, nominee or agent for the account holder

Deposit accounts

The balance or value entered in the account at the end of the relevant calendar year or, if the account was closed during the year, information that the account was closed

The total gross amount of interest amount paid or credited to the account during the calendar year

Other accounts The total gross amount paid or credited to the account holder during the calendar year, with respect to which the reporting financial institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the account holder during the calendar year

How will the confidentiality of the information exchanged and the security of exchanges be guaranteed?

Data will be exchanged in accordance with the applicable legal provisions relating to confidentiality and the protection of personal data.

The exchange of data between financial institutions and the Administration for the purposes of automatic exchange will be achieved through the provision of secure, point-to-point communications.

The exchange of data between the Administration and the OECD will be carried out via the OECD’s centralised secure platform, Common Transmission System (CTS).

What documentation should financial institutions resident in Monaco consult when implementing automatic exchange?

The legislation below applies to the implementation of automatic exchange of information:

In addition to the texts noted above, the Government has worked with professionals to develop a practical guide more specifically aimed at all Monegasque financial institutions to help them implement the exchange process within their organisations. This practical guide is intended solely for information purposes. Only published legislative and regulatory texts on the automatic exchange of information for tax purposes shall be deemed authentic.

The list of reportable jurisdictions and partner jurisdictions is updated through Ministerial decrees.

Will the Principality of Monaco be providing residents with a tax identification number?

No, the Principality will not provide tax identification numbers.

Can an individual account holder or a person who controls an entity which holds an account be a tax resident of more than one jurisdiction?

Yes. In these circumstances, reporting financial institutions will need to report the information collected to each jurisdiction in which the account holder (individual or manager of an entity) is a tax resident. In this context, a Monaco resident may be a reportable person if he or she is also resident in another reportable jurisdiction for Monaco.

Is the wider approach applicable in Monaco?

The Monegasque financial institutions must apply the wider approach  with respect to due diligence (not reporting).

The wider approach involves applying due diligence procedures to all financial accounts opened with reporting Monegasque financial institutions.

The advantage of the wider approach for due diligence procedures is that it means that financial institutions do not have to review their classifications and collect new information if a foreign jurisdiction becomes a reportable jurisdiction.

Monegasque financial institutions are responsible for identifying reportable financial accounts. Only reportable accounts need to be reported to the Monegasque authorities.

What options are left to the discretion of reporting financial institutions?

In terms of implementation, the Common Reporting Standard leaves a series of options to the discretion of each jurisdiction. Some of these options are closed due to the fact that Monaco has signed the EU Protocol, which aims to achieve a degree of homogeneity between signatories. The Principality of Monaco has decided to leave the other options open in order to facilitate the work of Monegasque financial institutions and offer them some flexibility.

Monegasque financial institutions can:

  • Engage service providers to discharge their reporting and due diligence obligations
  • Apply the due diligence procedures for new accounts to pre-existing accounts
  • Apply to lower value accounts (<USD 1 million) the due diligence procedures for higher value accounts (>USD 1 million)
  • Apply the residence address test or electronic indicia search of files held to pre-existing lower value accounts held by individual account holders
  • Opt not to review, identify and report pre-existing entity accounts with a an aggregate account balance or value of USD 250,000 or less
  • Apply the alternative procedure for group cash value insurance contracts or group annuity contracts
  • Use existing standardised industry coding systems for the due diligence process
  • Use the thresholds stated in dollars in the CRS (thresholds have been converted into euros in Monegasque legislation)
  • Apply the expanded definition of pre-existing accounts
  • Apply the expanded definition of related entities
  • Report the discretionary beneficiaries of a trust which is a passive non-financial entity only in years in which they receive a distribution

 

Monegasque financial institutions are obliged to:

  • File nil returns

 

Monegasque financial institutions are not authorised to:

  • Use the alternative approach to calculating account balances
  • Use an alternative reporting period
  • Gradually phase in reporting of gross sale proceeds
  • Apply grandfathering rules for bearer shares issued by exempt collective investment vehicles

What sanctions will be applied in the event that financial institutions and/or their client fail to fulfil these obligations?

Pursuant to Act No. 1.445 of 19 December 2016 and Ordinance No. 6.208 of 20 December 2016 , reporting Monegasque financial institutions that do not complete their declarations and due diligence obligations or make incomplete or inaccurate statements are liable to administrative and criminal penalties.

Pursuant to Act No. 1.445 of 19 December 2016 , individuals who intentionally communicate incomplete or incorrect self-certification to a financial institution or do not communicate a change in circumstances are liable to criminal penalties

Financial institutions

Which financial institutions are required to report information as part of automatic exchange?

Financial institutions, which have a reporting obligation, include not only banks and custodians, but also certain TCSPs (Trust & Corporate Services Providers) and collective investment vehicles. Retirement funds and public pension funds are exempt from reporting obligations.

Special case: management companies

Management companies are, by virtue of their activities, reportable financial institutions. However, since they do not, as a rule, have any accounts to report, they are exempt from reporting obligations.

Special case: trusts

In accordance with the Common Reporting Standard, a trust may fall under various categories of entity, depending on the nature of its activities.

Classification of trust
  • Financial institution
  • Active non-financial entity (NFE)
  • Passive non-financial entity
Situation
  • The trust is an investment entity
  • For example, the trust is a non-profit entity ("regulated charity")
  • The trust is neither a financial institution nor an active NFE
Person responsible for obligations
  • Trustee
  • Financial institutions
  • Financial institutions 
Reported persons
  • Settlor
  • Mandatory beneficiaries
  • Any individual exercising ultimate control over the trust
  • Discretionary beneficiaries (only if they have received a distribution during the year)
  • Holders of debt securities
  • N/A
  • Settlor
  • Trustee
  • Protector
  • Mandatory beneficiaries
  • Discretionary beneficiaries (only if they have received a distribution during the year)

 

Financial accounts

What types of financial account are reportable as part of automatic exchange of information?

Reportable accounts include accounts held by individuals, some entities and certain investment vehicles, which includes some trusts and certain Monegasque non-trading companies. The Common Reporting Standard includes a requirement to look through passive entities in order to identify and report on the individuals who control these entities.

Which low-risk accounts specific to Monaco are excluded?

No accounts are excluded in Monaco, beyond those already excluded in the Common Reporting Standard:

  • Retirement and pension accounts
  • Tax favoured accounts other than retirement accounts
  • Temporary life insurance policies
  • Estate accounts
  • Escrow accounts
  • Deposit accounts with unreturned overpayments

Due Diligence Process

What due diligence procedures must reporting financial institutions follow to identify reportable accounts?

The Common Reporting Standard sets out a solid body of due diligence procedures which reporting financial institutions must follow in order to determine reportable accounts and obtain the required identification information from account holders for these accounts.

These procedures distinguish between accounts held by individuals and entity accounts, and between pre-existing and new accounts, recognising that it is more difficult and costly for financial institutions to obtain information from existing account holders than at the time of opening an account.

  Accounts held by individuals Entity accounts

Pre-existing accounts 

(Accounts opened before 1 January 2017)

  • No de minimis threshold
  • Lower value accounts (<1M$): simplified due diligence procedures. Residence address test based on documentary evidence and/or electronic indicia search
  • Higher value accounts (>1M$): enhanced due diligence procedures. As a rule, these involve a paper record search and an actual knowledge test by the relationship manager
  • De minimis threshold of USD 250,000: no review for accounts below this amount (if option selected)
  • The financial institution must first determine if the entity is a reportable person, drawing on the information it has through anti-money-laundering procedures
  • In the case of a passive financial entity, the financial institution must then determine if the person or persons who control the entity are reportable persons

New accounts

(Accounts opened after 1 January 2017)

  • No de minimis threshold
  • Tax residency is determined through self-certification by the account holder, which is verified against the information held by the financial institution
  • No de minimis threshold
  • The tax residence of the entity and, in the case of a passive NFE, the persons who control the entity, is determined by self-certification when the account is opened

 

 

Do the tax identification number or date of birth for pre-existing accounts need to be declared if they are not noted in the records of the reporting financial institution?

No. However, the reporting financial institution must make reasonable efforts to obtain these details by the end of the second calendar year following identification of pre-existing accounts as reportable accounts.

Reporting process

How will the reporting process work and what timescales are involved?

The competent authorities will exchange information according to a secure IT schema (XML), on an annual basis, in the nine months following the end of the relevant calendar year, i.e. before 30 September of the year following the relevant year.

In Monaco, financial institutions will need to apply the due diligence rules for identifying reportable accounts since 1 January 2017, with a view to sending information to the tax authorities starting in 2018. Each year, reporting Monegasque financial institutions will have until 30 June to send information relating to the previous year. The first exchanges of information between the Principality of Monaco and reportable jurisdictions will take place on 30 September 2018 at the latest. 

How does the reporting platform work?

A user guide of the reporting platform, intended to professionals involved in the process, will be available for download at the bottom of this page once the platform is open.

What schema should financial institutions use to prepare and report information to be shared under automatic exchange?

Financial institutions should use the XML schema published by the OECD, which can be found on the Automatic Exchange of Information portal  on the OECD website. The XML schema and associated user guide are also available for download at the bottom of this page. 

[1] It is not mandatory to report place of birth in Monaco. 

http://en.gouv.mc/Policy-Practice/Monaco-Worldwide/International-Tax-Compliance/Frequently-Asked-Questions-FAQ-on-automatic-exchange-of-information-for-tax-matters