VAT: Amendment to the Code of Taxes on Turnover (Sovereign Order No. 12.056 and Ministerial Order No. 2026–431 of 23 July 2026)

SUMMARY

Sovereign Order No. 12.056 of 23 July 2026 on Value Added Tax (VAT), and Ministerial Order No. 2026-431 of 23 July 2026 on Value Added Tax (VAT) (JDM No. 8810 of 31 July 2026), amend the Code of Taxes on Turnover and its Annex.

French VAT provisions have been transposed into Monegasque law, originating from: Finance Law No. 2026-103 of February 19, 2026 (LF 2026); the Order of September 8, 2025, establishing criteria for the supply and installation in homes of solar-powered electricity generation equipment (with an installed capacity of 9 kilowatt-peak or less) that qualifies for the reduced VAT rate mentioned in Article 278-0 bis of the General Tax Code; and the Order of 15 May 2026, supplementing the list of special equipment, specifically technical aids and other devices, eligible for the reduced VAT rate provided for in Article 30-0 B of Annex IV to the General Tax Code:

1. Extension of the scope of the 5.5% reduced rate to new goods and services (measures supporting the energy transition and visually impaired persons);
2. Strengthening of the regulatory framework for VAT tax-refund operators regarding sales to non-resident travelers;
3. Removal of the exclusion from the right to deduct VAT on goods and services used for advertising purposes;
4. Adjustment of VAT exemption thresholds for new businesses;
5. Repeal of obsolete provisions regarding invoices. transmitted electronically.

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IN DETAIL

1. Extension of the scope of the 5.5% reduced rate to new goods and services

→ Harmonisation of VAT rates applicable to the collection and treatment of household and similar waste:

Henceforth, the reduced rate of 5.5% applies to all collection and treatment services for household waste and other waste which, given their characteristics and the quantities produced, can be collected and treated without particular technical constraints, as well as services that contribute to the proper execution of these operations (deletion of k) of Article 56 CTCA, amendment of M of Article 52-0 CTCA - M of Article 278-0 bis of the French CGI).

This measure applies to transactions where the chargeable event occurred on or after 21 February 2026.

→ Installation of air-to-air heat pumps:

The reduced rate of 5.5% applies to air-to-air heat pumps (fixed reversible air conditioning systems, intended to be permanently installed in buildings, which draw energy from outdoor air to heat or cool the air inside), where their characteristics meet environmental performance and durability objectives based on a life cycle analysis, as defined by ministerial order (new paragraph in 3° of I of Article 52-0 bis CTCA - 3° of I of Article 278-0 bis A French CGI, Order of 13 July 2026 amending the nature and characteristics of energy renovation services benefiting from the reduced rate of value added tax provided for in Article 278-0 bis A of the French General Tax Code). Previously, the reduced rate of 5.5% was reserved for air-to-water and geothermal heat pumps.

This measure applies to transactions for which the chargeable event occurred on or after 21 February 2026.

→ Supply of district cooling:

The reduced VAT rate of 5.5% is extended to the supply of cooling energy distributed through networks. Before this date, the reduced rate only applied to the supply of renewable heat (new B bis to Article 52 CTCA - B bis of Article 278-0 bis French CGI).

This measure applies to transactions for which the chargeable event occurred on or after 21 February 2026.

→ Residential photovoltaic installations:

The reduced rate of 5.5% applies to the supply and installation, in residential premises, of electricity generation equipment using solar radiant energy with a power output of 9 kilowatts peak (kWp) or less, the design and characteristics of which meet the criteria defined by ministerial order to achieve all or part of the following objectives: 1° Electricity consumption at the place of production; 2° Energy efficiency; 3° Durability or environmental performance.

Ministerial Order No. 2026-431 of 23 July 2026 sets these criteria (new wording of Article A-130 ter Annex CTCA - French Order of 8 September 2025, Annex IV, Article 30-0 E French CGI):

• A new division "1 ter. Electricity generation equipment using solar radiant energy with a power output of 9 kilowatts peak or less” is created (replacing the division “1 ter Products adapted for combating the spread of COVID-19” and related Articles A-130 ter, quater and quinquies) (Chapter V - Calculation of Tax, I - Rates, A bis Annex CTCA).
• Electricity generation equipment using solar radiant energy with a power output of 9 kilowatts peak (kWp) or less to which the reduced rate of 5% applies is that whose characteristics comply with the following cumulative criteria:
  a) The carbon footprint of the modules is less than 530 kgCO2eq/kWp;
  b) The silver content of the cells is less than 14 mg/W;
  c) The lead content of the modules is less than 0.1%;
  d) The cadmium content of the modules is less than 0.01%;
  e) An energy management system is associated with the equipment referred to in this paragraph 1 enabling real-time collection of production and consumption data and control of the consumption behaviour of electrical equipment to maximise electricity consumption at the place of production.

Furthermore, to benefit from this reduced rate, installation, fitting and maintenance services for electricity generation equipment using solar radiant energy must be carried out by a person holding, during the performance of the service, a valid certification or professional qualification corresponding to the type of installation performed and the size of the project and meeting the technical requirements set by ministerial order. (new paragraph in P of Article 52-0 CTCA - P of Article 278-0 bis French CGI).

These provisions come into force on 1 October 2025.

→ Canes and associated electronic or optronic assistance devices for blind or visually impaired persons

The reduced VAT rate of 5.5% applies to coloured canes (“white cane” type) as well as electronic or optronic assistance devices specifically designed to be associated with them, which are intended to facilitate locomotion, spatial orientation, signalling or social integration of the visually impaired person (completion of 2 of B of Article A-130 of Annex CTCA - 2 of Article 30-0 B of Annex IV French CGI)

This measure comes into force on 30 May 2026.

2. Strengthening of the regulatory framework for VAT refund operators for sales to non-resident travellers

Persons who act, in their own name and on their own behalf or in the name and on behalf of affiliated vendors, in a VAT-exempt transaction for the supply of goods dispatched or transported by the purchaser who is not established in Monaco or France, or on his behalf, outside the European Union (excluding capital goods and stores for pleasure boats, private aircraft or any other means of private transport, as well as services directly linked to exportation), must, in order to carry out their activity, be approved by the customs administration as a VAT refund operator (amendment of Article 29 bis CTCA - Article 262-0 bis French CGI).

The amendments aim to:

→ Ensure the financial solvency of VAT refund operators to obtain approval:

• The financial solvency criterion is deemed to be met provided that the applicant has not defaulted on payments to tax and customs authorities during the three years preceding the submission of the application, is not subject to collective proceedings and provides proof, on the basis of accounting records and other available information, that they have a financial position enabling them to meet their commitments, taking into account the characteristics of the type of economic activity concerned. If the applicant has been established for less than three years, their solvency is assessed on the basis of information available at the time of submitting the application.
  
• It is added that “Failing this, the criterion is deemed to be met when the applicant has a financial guarantee covering at least one quarter of the amounts resulting from their commitments. This guarantee results from a surety commitment subscribed by a mutual guarantee company, a collective guarantee body, an insurance company, a bank or any financial institution authorised to provide a surety. Where these amounts cannot be determined, the amount of the financial guarantee is set under the conditions provided for by ministerial order;"

→ Specify the criterion of absence of sanctions to obtain approval:

• The applicant must not have been sanctioned for serious and repeated breaches of customs or tax rules and must not have been subject to criminal sanctions, in Monaco, France or another Member State of the European Union, during the three years preceding the submission of the application or the withdrawal decision.

→ Strengthen the obligations of approved VAT refund operators and take account of developments in customs remote services:

• The approved VAT refund operator “Ensures compliance with all technical obligations set by the customs administration for the transmission of electronic data necessary for VAT refund operations and uses a computerised data exchange platform directly connected to the customs administration’s remote service".
  
• They must ensure regular training and information, not only for their staff, but also “for the suppliers and recipients of operations in which they are involved”;
  
• They must notify “the administrative authority, within one month, of any amendment to their statutes or any change preventing them from meeting the criteria mentioned in I” (to obtain approval);
  
• They must provide evidence “of the export of goods for which a value added tax refund is requested".

→ Create sanctions for operators carrying out this activity without approval or despite the withdrawal of their approval:

The administrative authority may impose the sanctions provided for in B to D:

B. - The following result in the lapse of approval:

1. The sale of the business of the approval holder;
2. The acquisition of control of the company holding the approval.

The acquiring company is presumed to exercise such control when it holds, directly or indirectly, a proportion of voting rights or securities equal to or greater than 33.33% and no other partner or shareholder holds, directly or indirectly, a proportion greater than its own.

C. - When a person acts or attempts to act as a VAT refund operator, notably by presenting themselves as such, without holding approval, the administration may impose a fine not exceeding €300,000. Such person may not apply for such approval for a period of three years from the date on which the facts were established by the administration.

D. - Non-compliance by the approved VAT refund operator with their obligations, as established by the customs administration, results, after a period of thirty days allowed to the VAT refund operator to submit observations, in the application of a fine not exceeding €300,000.

→ Specify that the customs administration determines:

1. The procedures for issuing, renewing and withdrawing approval;
   
2. The conditions and procedures prior to certification of the interconnection between the computerised data exchange platform and the customs administration’s remote service.

The measures come into force on 1 March 2026.

3. Abolition of the exclusion of the right to deduct for goods and services used for advertising

Henceforth, goods and services used for advertising are not subject to any exclusion or restriction of the right to deduct (Article 46 ter CTCA - Article 273 septies E French CGI).

In other words, VAT paid in respect of goods and services used for advertising, including advertising for alcoholic beverages, is deductible under ordinary law without restriction, provided that these goods and services are used for operations of the taxable person that give rise to a right of deduction.

This measure applies to transactions for which the chargeable event occurred on or after 21 February 2026.

4. Adjustment of VAT exemption thresholds for new businesses

Taxable persons established in Monaco, authors of works of the mind and performing artists, or for their supplies of goods and services, benefit from an exemption that relieves them of VAT payment when they have not achieved turnover in Monaco exceeding certain thresholds.

It is reformulated that “For a taxable person commencing their activity during the year, these turnover thresholds are adjusted in proportion to the duration of the year remaining from the date of commencement of activity.” (amendment of II of Article 89 CTCA - III of Article 293 D French CGI).

This measure applies to transactions for which the chargeable event occurred on or after 21 February 2026.

5. Repeal of obsolete provisions concerning invoices transmitted electronically

Ministerial Order No. 2026-431 of 23 July 2026 repeals Articles A-153 quater, A-153 quinquies, A-153 sexies and A-153 septies of the Annex to the CTCA, implementing Article 71 bis CTCA, repealed with effect from 1 January 2013, which provided for the transmission of invoices by means of a remote transmission system meeting standards equivalent to those defined in Article 2 of Commission Recommendation 1994/820/EC of 19 October 1994 relating to the legal aspects of electronic data interchange (EDI).

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