If Swiss banking secrecy laws gave Switzerland the world banking capital status, Monaco’s residence policy gives its realtors a thriving business.
What is common between the Canadian Raonic who lost in the Australian Open semifinals and the Serbian Djokovic who won it? Well, they are both residents of Monaco, and have made Monte Carlo their home on paper. Yes, for tax purposes.
What beckons the high earners to Monte Carlo is its residential status if one owns/rents a residence there even if he doesn’t live in it all the time (for the first nine years, three months a year stay is sufficient to remain a resident). At US $54,300 a square meter, a residential flat doesn’t come cheap but for those awash in money does it matter?
And in any case even renting of a studio apartment will do but in either case a wannabe resident has to open an account in one or more of its secretive banks with a minimum deposit of 5,00,000 euros.
India let off foreign sportspersons and entertainers with a slap on the wrist-10 percent of the receipts, period. But the government doubled it to 20 percent in 2014, perhaps smelling greater revenue from foreign cricketers participating in the annual IPL circus and to narrow the gap between the withholding tax rates for such persons in vogue in other countries and India.
In Monaco, there is no personal Income Tax and that beckons high income earning individuals. UAE too doesn’t have personal income tax but the status of resident is not there for the asking as in the case of Monaco. This then provides the gravitas for seeking tax asylum, as it were, in Monaco. The only tax its residents pay is the withholding tax in other countries.
No other country perhaps confers the status of residence on someone who owns/rents a residence. Most of the countries follow the minimum stay test. Those who stay in India in a financial year for 182 days or more are treated as residents of India under its income tax law which far from being an honor, vests one with tax liability on his global income.
Small wonder then that Indians with considerable overseas income, the one that is many times over their Indian income, seek the non-residential status by consciously staying for less than 182 days in India. Such maneuvers by the Big B when he had huge foreign income, by the flamboyant industrialist Vijay Mallya and the deceased Manu Chhabra are stuffs of income tax folklore in the country.
One wonders why Indian high income earners are not joining the Monte Carlo bandwagon in droves. They are otherwise quick to latch onto tax avoidance possibilities. Witness a large number of Indians floating investment companies in Mauritius to take advantage of the DTAA between the two countries that spares capital gains earned in India by residents of Mauritius from tax liability in both the countries.
If Mauritius beckons Indian corporates, Monaco should beckon fleet footed Indian individuals who can stay away from India in a financial year for more than half of the time. They can slip into the neighbouring Nepal or Bhutan or to any other country either at a stretch or from time to time to stay clear of the 182 days danger mark while taking care to own/rent a residential house in Monaco and living there for three months a year. If an Indian is a non-resident, he can be the resident of any other country. Why not the salubrious Monaco? All their non-Indian income both actual and contrived can be insulated from income tax.
OECD which has recently succeeded in taming the MNC avarice through base erosion and profit shifting (BEPS) manipulations indulged in by them, should also address the Monacan escape route. If Swiss Banking Secrecy Laws gave Switzerland the world Banking Capital Status, Monaco’s residence policy gives its realtors a thriving business.
In 2012 surprisingly, the OECD removed Monaco from its blacklist of tax havens when the tiny nation offered full cooperation in its fight against black money. One wonders though why the OECD didn’t insist on abolition of conferment of residential status on such laughably simple terms-as laughably simple as registering a company in a jiffy in Mauritius and thus becoming a Mauritius resident company.
Perhaps it may feel that with the highest density of population on a land area of just over two square kilometers, it cannot indulge many more than its current population of about 34,000 but then skyscrapers may sprout should the number of wannabe residents start bursting at its seams.