French nationals residing in Monaco may be subject to social taxes in France

In a decision on June 11, 2014, the French Administrative Supreme Court held that a French national residing in Monaco may be subject to social taxes on property income (dividends, interest, property income, etc.) if the French national qualifies as French tax resident under French national law (Article 4 B of the French Tax Code).

Pursuant to the tax treaty between France and Monaco, a French national transferring his/her domicile to Monaco is still subject to French income taxes in France (Article 7), but cannot be subject to French social taxes, i.e., the CSG and CRDS (French Administrative Supreme Court, Nov. 10, 2004).

The French Administrative Supreme Court pointed out in this case that a French national transferring his/her domicile to Monaco, however, can continue to qualify as a French tax resident within the meaning of French national law (Article 4 B of the French Tax Code).  In this situation, the French national is still subject to French social taxes on property income, from both French and foreign sources. Indeed, the tax treaty does not settle the issue of a possible conflict of tax residence between the two countries, and is not applicable to French social taxes.

Conversely, if the French national does not qualify as a French tax resident within the meaning of French national law, only his income from French-source real estate assets can be subject to French social taxes (in particular, real estate capital gains and renting income).

To conclude, a person (French or not) who becomes a resident of Monaco does not necessarily avoid social taxes in France.  This can only happen when the individual breaks all ties with France so that he will not be seen as a French tax resident within the meaning of the French Tax Code.