Following on from its previous tax reform initiated by law 1.548 of 6 July 2023 (see our article of 21 September 2023 entitled "Tax reform on real estate transfers when the legislator kills two birds with one stone"), on 27 June 2024 the National Council adopted the government Bill 1064 on the regulation of property dealers.
A tax reform...
Whereas previously, under law 1.044 of 8 July 1982, property dealers operating in the Principality benefited from a total exemption from registration duties on the purchase of the property that was the subject of the transformation/resale transaction, from now on they will only benefit from a partial exemption from these duties and under stricter conditions.
Hence, property dealers will follow the same fate as property developers (revision of law 842 of 1 March 1968 by law 1.548 referred to above).
In order to benefit from the 50% exemption from registration duties normally incurred on such property transactions, property dealers will now have to:
- undertake to resell the property within 3 years instead of 4 (except in the case of a one-year extension, the conditions for which have been made more flexible);
- provide evidence that the property complies with current standards, particularly electrical and energy standards, thereby contributing to the Principality's environmental objectives.
On the other hand, the obligation to have work amounting to a minimum of 5% of the purchase price of the property carried out by companies established in the Principality, which was initially envisaged in the parliamentary Bill, has been dropped. It was considered that this percentage did not always correspond to the reality of the market.
If these conditions are not met, the duties normally payable on the acquisition of the property will have to be paid in full by the defaulting property trader, plus interest at the statutory rate and a dissuasive additional duty of 5% (compared with the 6% initially envisaged).
But not only ...
This being said, increasing State tax revenues is not the only objective pursued by the government Bill 1064, which was born of the transformation of the parliamentary Bill 252 of 10 May 2021.
This reform responds to the desire to regulate the profession of property traders for reasons of both economic public policy and compliance. In fact, the regulation of the profession coupled with the reduction in the tax advantage appeared to be able to constitute an additional tool in the service of compliance.
The National Risk Assessment no. 2 carried out at the time by the former SICCFIN presented the activity of property dealers in the Principality as a high-risk activity and included the aforementioned parliamentary Bill no. 252 among the mitigating measures.
Thus, in order to operate in the Principality, property dealers will have to:
- provide proof, in order to obtain an administrative authorization to operate (i) that they are actually resident in Monaco in the case of individuals operating in their own name and managers of limited liability companies and (ii) that at least 75% of the share capital is directly or indirectly held by individuals of Monegasque nationality or who can prove that they are actually domiciled in Monaco in the case of legal entities;
- provide a first demand financial guarantee exclusively in favor of the Treasury;
- take out an insurance policy covering the financial consequences of professional civil liability.
The status of property traders is thus closer to that of estate agents and is becoming a regulated profession.
On the other hand, the ground for refusal to issue a license based on the fact that the profession is sufficiently represented in the Principality has been removed from the final version of the law, since it has been considered that it is already a prerogative of the Minister of State.
Some may therefore regret the latest revisions to this law and consider that they are not likely to combat certain speculative abuses of the profession. Others will welcome the more liberal and flexible nature of the new law.
With regard to the transitional provisions:
- the provisions relating to the new declaration and authorization procedures will apply after the law comes into force;
- persons already engaged in this activity will have to comply with the new regulations (financial guarantee, insurance) within 3 months of the law coming into force; and
- the new tax measures will apply to deeds of purchase registered by property dealers from 1 September 2024.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.