ISB Corporate Tax: Key Facts
The Territorial Principle
Monaco's corporate tax, known as the ISB (Impôt sur les Bénéfices), is levied at a rate of 25% — but with a crucial territorial twist that sets it apart from most corporate tax regimes. The ISB only applies to companies that generate more than 25% of their turnover outside of Monaco. Companies whose revenue is entirely or predominantly derived from activities within the Principality are exempt from corporate tax entirely.
If your Monaco company earns more than 25% of its revenue from outside the Principality, the full 25% ISB applies to total net profits. Companies with 75%+ local revenue pay zero corporate tax. This territorial rule is the cornerstone of Monaco's corporate tax system.
ISB Thresholds and Rates
| Scenario | ISB Rate | Dividend Tax | Effective Total Tax |
|---|---|---|---|
| Company with 100% local revenue | 0% | 0% | 0% |
| Company with 75%+ local revenue | 0% | 0% | 0% |
| Company with >25% foreign revenue | 25% on net profits | 0% | 25% max |
| Large multinational (Pillar Two) | Min 15% effective | 0% | 15-25% |
| French comparison (standard) | 25% | 30% flat tax | ~47.5% |
| UK comparison | 25% | 33.75% (higher rate) | ~49.6% |
Planning Opportunities
This territorial approach creates significant planning opportunities. A consulting firm serving exclusively Monaco-based clients, a restaurant operating in Monaco, or a retail business with only local customers would pay zero corporate tax. Conversely, a software company selling internationally, a trading firm, or an e-commerce business would be subject to the 25% ISB on their total profits if more than 25% of revenue comes from outside Monaco.
Deductions and Distributions
The ISB is calculated on the company's net profits after deductible expenses. Standard business deductions include employee salaries, rent, professional fees, depreciation, and marketing costs. Monaco does not impose a withholding tax on dividends paid to shareholders, which means that profits can be distributed tax-free to Monaco-resident individuals. This combination of 25% corporate tax with 0% dividend tax results in an effective total tax burden that is competitive with most European jurisdictions.
Choosing Your Legal Entity
For entrepreneurs structuring a new business in Monaco, the choice of legal entity matters. The SAM (Société Anonyme Monégasque) requires a minimum capital of €150,000, while the SARL (Société à Responsabilité Limitée) requires only €15,000. Both are subject to the same ISB rules. The process of obtaining a business license (autorisation d'exercice) typically takes two to four months and requires demonstrating the viability of the business and its connection to Monaco.
Recent Developments
Recent developments include Monaco's alignment with the OECD's global minimum tax (Pillar Two), which ensures that large multinational groups operating in Monaco pay at least 15% effective tax. For small and medium enterprises, the existing ISB framework remains unchanged. Monaco continues to offer a business-friendly environment with low bureaucracy, political stability, and access to a wealthy local consumer base.
Guide to setting up a business in Monaco: legal structures, licensing, and step-by-step process.
Estimate your effective corporate tax rate in Monaco based on your revenue mix and structure.
Key Takeaways
- The ISB (25%) only applies to companies earning more than 25% of revenue outside Monaco — fully local businesses pay 0%.
- No withholding tax on dividends: profits distributed to Monaco-resident shareholders are completely tax-free.
- SAM requires €150,000 minimum capital; SARL requires only €15,000. Both follow the same ISB rules.
- The OECD Pillar Two minimum tax (15%) applies to large multinational groups but does not affect SMEs.
- Compared to France (25% CIT + 30% flat tax on dividends), Monaco's effective total tax is significantly lower.