Submitted to the Public Session on October 15th, 2020, the draft law on the regulation of the profession of property trader (the “Draft Law“) has been examined since February 3rd, 2021 by the Finance and National Economy Committee of the Parliament.
The parliamentary report on the Draft Law sets out four major objectives: to make the profession of property trader a truly regulated profession, to strengthen the conditions of access to and exercise of the profession, to make the derogatory tax regime for property traders more attractive for the Monegasque State and to encourage property traders to improve property acquired with a view to its resale.
The Draft Law defines property traders as persons (individuals and commercial companies) which alone can carry out transactions for the purchase of immovable property, business assets or shares in civil property partnerships (“SCI”), with a view to reselling them, and who carry out such transactions as a regular profession[1] and on their own behalf in accordance with the Law[2].
This text provides for both a declaration system, subject to certain conditions, and an application system for an administrative authorization to exercise the profession of property trader:
- Declaration: Any Monegasque natural person may practice the profession of property trader by making a simple declaration to the Minister of State. Monegasque partners of S.A.R.L., S.N.C. and S.C.S. are also subject to the above-mentioned declaration procedure[3].
- Application for an administrative authorization:
- Foreign natural persons may only exercise the profession of property trader if they can prove their effective residence in the Principality;
- Legal entities whose registered office is located in Monaco cannot exercise the profession of property trader.
Legal entities whose registered office is located abroad may only exercise the profession of property trader after obtaining authorization from the Minister of State and on condition that the said persons establish themselves in Monaco[4]. Foreign partners of S.A.R.L., S.N.C. and S.C.S. will also be subject to the administrative authorization procedure.
In general, the above-mentioned license will be subject to several conditions:
- evidence of professional integrity;
- the number of property traders authorized to operate at the time of the application for authorization is not sufficient to meet the Principality’s needs;
- evidence, at the time of the application for authorization (but also in the case of a simple declaration), of a financial guarantee issued by a bank or financial institution capable of giving security and having its registered office in Monaco[5];
- justify, at the time of the application for authorization (but also in the case of a simple declaration), the subscription of an insurance contract covering the pecuniary consequences of one’s professional civil liability due to the activity of property trader.
The Draft Law provides that property transactions which are not subject to value added tax, will involve the payment of a registration fee equal to 2.25% of the value of the property acquired under certain conditions[6].
The text provides for sanctions, under certain conditions, both administrative (suspension or deprivation of effect of the declaration or of the administrative authorization) and criminal (€18,000 to €90,000 fine, which may be increased to twice the profit possibly realized).
Finally, the provisions of the law will apply to all procedures for declarations and applications for administrative authorization that are pending after its entry into force.
In addition, any person who, on the date of entry into force of the law, is already carrying on an activity as a property trader on the basis of a declaration or authorization, will have a period of one year to comply with the provisions of this new law, failing which the declaration to carry on such an activity will be deprived of effect or the application for authorization will be revoked[7].
[1] The report specifies in particular that “if an individual were to engage in habitual acquisition and resale transactions, he/she would run the risk of being reclassified as a property trader, which would expose him to criminal sanctions or the application of increased registration duties. In order to qualify a person as a property trader, it is therefore important to be vigilant as to the actual exercise of the activity, and in particular the recurrence of the transactions carried out or their importance in view of the profits made”.
[2] For the application of the Draft Law, developers (“lotisseurs”) are assimilated to property traders.
[3] Monegasque partners of S.A.M. or S.C.A. are exempt from the declaration procedure.
[4] Foreign partners of an S.A.M. or S.C.A. are exempt from the administrative authorization procedure.
[5] The minimum amount of the said guarantee shall be fixed by Sovereign Order.
[6] These conditions are in particular the fact that the property trader complies with the specific obligations imposed on persons engaging in intermediary operations within the meaning of law n° 474 of March 4th, 1948, the production of a tax declaration at the start of operations, the formalization in the deed of purchase of their intention to resell within a period of 3 years, the express commitment to carry out works for a minimum amount of 5% of the value of the property acquired etc… …
[7] The financial guarantee and professional indemnity insurance required for any application for an administrative authorization must be subscribed to within three months of the entry into force of the new law.
