Subject to certain conditions, new companies formed in Monaco are eligible for a corporate tax holiday for the first two years of operations. In addition, the taxable base of new companies subject to corporate tax is reduced in the subsequent three years at the following rates:

25% of the taxable base in the 3rd year;
50% of the taxable base in the 4th year; and
75% of the taxable base in the 5th year.

From the 6th year, corporate tax is computed at 100% of the taxable base.

Research and Development Tax Credit

Monaco provides an optional R&D tax credit of 30% of a company's annual operations expenditure related to R&D. The 30% credit is limited to EUR 100 million in expenses, with a 5% credit on expenses over the limit, and the total credit is capped at EUR 10 million.

Effective 1 January 2021, the tax credit is limited to 50% of the corporate tax due by a company for the year in which the R&D expenses are incurred. Any excess credit can be carried forward for up to five years, subject to the 50% limit for each year. However, the unused portion of the credit available at the end of the five-year period would lapse and cannot be carried forward.

Further, excess R&D tax credit recorded for the last fiscal year starting prior to 1 January 2021 is also subject to the 50% limit in the following years but can be carried forward for an unlimited period.

Expenses eligible for the R&D tax credit include depreciation charges on fixed assets (excluding buildings engaged in scientific and technical research operations) and charges on patents secured for research operations.

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