Overdue overtime boost

Big construction projects create jobs in the Principality

Even more encouraging is that the exemption is to be backdated to October 2007 when France first introduced the TEPA (en faveur de travail, de l’emploi et du pouvoir d’achat) law to boost its own economy. The first clause in that law exonerated workers in France from tax on overtime above their 35-hour week.

The news is particularly welcomed by the hard-pressed French residents in the Principality who must pay tax to France as part of a treaty signed between the two states way back in 1963. Along with Americans, who are obliged to fill their country’s coffers wherever they are in the world, they are the only nationalities paying income tax in Monaco.

Others who will benefit are the 35,000-plus commuters of various nationalities who pour in every day from neighbouring towns in France to fill the huge reservoir of jobs available. It may be a tiny country but an ongoing building programme has ensured that there has been no rise in unemployment despite the world financial crisis. Commuters from Italy are of course not affected by this change.

Tax is a thorny issue with French citizens living in Monaco. Their numbers have been dropping steadily since 1982 (12,655) to 8,785 according to the census in 2008, mainly due to the dramatic rise in rents over the last ten years which has made it uneconomical for them to live here.

Last year, a court in Marseille came to a decision that French people born in Monaco, and who had always lived there, were not liable for French income tax – as long they did not fall into the category described in Article 7-1 of the 1963 French-Monegasque treaty. This states that: “French citizens who transfer their domicile or residence to Monaco – or who cannot bring evidence of a five-year continuous residency as at 13 October 1962 – will be liable to pay French personal income tax, as if they had their domicile or residence in France”.

All the court did was to apply a strict application of the wording to win their case for a young French-Italian man who thus became eligible not to pay tax. In theory, this should mean that all those in his situation should be exonerated, but just how this decision will be applied remains unclear. CL