Why will France have to pay Monaco several million euros in 2026?

In 2025, Monaco received €120 million from France © Pixabay

France is preparing to pay €138 million to the Principality under a tax mechanism that is more than sixty years old.

It was a report by TVMonaco that brought this issue back into the spotlight this week. According to the Monegasque channel, in 2026, France’s contribution to the Principality’s budget will reach €138 million. This is a significant increase compared to previous years, with the retrocession amounting to around €120 million in 2025, after fluctuating around €100 million during the 2010s. This increase is mainly due to the very good results of VAT collected in Monaco in 2024.

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The de Gaulle–Prince Rainier III agreement

To understand this financial flow, we must go back to 18 May 1963. This agreement, decided by General de Gaulle and Prince Rainier III, put an end to the tax exemption regime enjoyed by French nationals residing on the Rock.

Prior to this agreement, French citizens residing in Monaco paid their income tax solely in the Principality, directly contributing to its economy. Once Paris began taxing its expatriate citizens, Monaco lost a portion of its tax revenue, particularly from VAT.

The purpose of the sharing account system is to restore what the VAT revenues of the two states would have been if they had formed two separate territories. In short, France collects VAT on its territory that, in theory, should have gone to Monaco. The annual payment corrects this asymmetry. Its principle is laid down in the 1963 agreement, and its calculation methods have been specified in an exchange of letters between the two governments.