The French Riviera principality has long been a tax haven for athletes, celebrities and the ultra-rich because it serves up no income tax for residents.
By Justin Birnbaum, Forbes Staff
ovak Djokovic may be the most famous Serbian athlete on the planet, but it’s the tiny principality of Monaco that he calls home. Indeed, five of the ATP’s top-ten ranked players claim Monaco as their primary residency, and it’s easy to see why.
Located on the French Riviera, the 500-acre microstate enjoys more than 300 sunny days a year, it’s a short flight from several European capitals, and it has access to top training facilities, including the famed Mouratoglou Tennis Academy, which is less than an hour away by car.
But there’s another advantage for star athletes and the ultra-rich. Monaco is a tax haven, with no personal income, capital gains or investment taxes. For tennis’ top earners—such as Djokovic, ranked No. 1 on Forbes’ list of the world’s highest-paid tennis players with estimated earnings of $38.4 million over the last 12 months—the savings could be worth millions.
In addition to the 23-time Grand Slam champion, Monaco is the primary residence of Russia’s Daniil Medvedev (the world’s No. 3 player), Denmark’s Holger Rune (No. 5), Italy’s Janik Sinner (No. 6) and Greece’s Stefanos Tsitsipas (No. 7). “I come from Denmark,” Rune tells Forbes, “and it’s a great country but not a lot of tennis players. So for me, the facilities and the players that are here [in Monaco] to practice with are really important because in Denmark I cannot get this kind of experience.”
The principality is also home to some of the best Formula 1 drivers, including Max Verstappen, Lando Norris and Charles Leclerc—and it’s not just because they want to practice for Monaco’s famed Grand Prix. Many billionaires, both inside and outside of the sports world, also live there, including Everton F.C. owner Farhad Moshiri (with an estimated net worth of $3.1 billion), Belgian sugar heir Eric Wittouck ($8 billion) and Israeli real estate and shipping magnate Eyal Ofer ($19.4 billion).
Of course, Djokovic wasn’t the first athlete to enjoy these financial benefits. Swedish tennis legend Björn Borg, who won five straight Wimbledon titles and six additional majors at the French Open, spent more than a decade as a resident of Monte Carlo, dating to the late 1970s. Following his retirement from the sport at 26, Borg eventually got into financial trouble with his fashion business, moved back to Stockholm and narrowly avoided filing for personal bankruptcy after the Swedish government sought $40,000 in, yes, back taxes.
“It is an open secret,” says Dr. Andreas Bosse, an international legal consultant based in Monaco. “They come here for the nice weather, but everybody knows Monaco has substantial tax advantages.”
Residency isn’t particularly hard to obtain, either. The requirements consist of renting or buying an apartment, opening and funding a bank account with at least €500,000 and taking on a utilities contract, such as electricity. Prospective applicants must also have a clean criminal record and participate in an interview with a police offer from the Monaco Security Bureau. European and Swiss nationals can apply directly for residency in Monaco, and Bosse estimates that the process takes around two months. Americans, on the other hand, have to first apply for a long-term visa in France.
That’s not the only downside for U.S. citizens. Americans face an expatriation tax wherever they reside around the globe. “If they have no tax [in Monaco], you’ll continue to pay tax on your worldwide income as if you were living in Manhattan,” says Jerry August, co-chair of Fox Rothschild’s international taxation and wealth planning practice group.
The French, in a way, are also out of luck in the home of the famed Casino de Monte-Carlo. Because of a longstanding agreement, French nationals living in Monaco are still subject to their country’s income tax. In total, Monaco has 35 signed agreements, with 33 currently being enforced, around the exchange of tax information with countries around the world, including the U.S. and France.
Bosse notes, however, that in certain cases Monaco’s tax benefits are “not as big as people might assume.” Athletes competing around the world are still subject to income sourcing, or paying taxes in the jurisdictions where they are competing. If, for instance, Djokovic wins his 24th major at the 2023 U.S. Open, where the singles champions will win $3 million in prize money, he’ll owe nothing to the Monégasque government. But the IRS won’t be as forgiving.
Similarly, taxation can apply to sponsorship and social media income. Certain countries may argue that appearances, digital posts and online sales within their borders create taxable events, and that the proportionate amount of an athlete’s income earned in those situations falls under their laws. Unlike prize money, however, it’s harder to define.
“A fundamental principle of both U.S. and international taxation,” August explains, “is that a jurisdiction has the right to always tax you on your labor if your labor is performed in that country.” And that’s a racket no tennis player wants to mess with.
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