Friday, May 24

Why Monaco Attracts Top Tennis Stars Like Novak Djokovic and More

Why Monaco Attracts Top Tennis Stars Like Novak Djokovic and More


Novak Djokovic, arguably the most renowned Serbian athlete globally, has chosen Monaco as his home. Notably, Monaco is the primary residence for five of the top-ten ranked players in the ATP, and the reasons behind this choice are evident.

 

Monaco Attracts Top Tennis Stars Like Novak Djokovic
Monaco Attracts Top Tennis Stars Like Novak Djokovic

 

The allure of Monaco as a haven for athletes, celebrities, and the ultra-rich has endured for years, primarily due to its enticing tax policies. This glamorous principality nestled along the French Riviera boasts a unique advantage – it refrains from imposing income tax on its residents. This favorable tax regime has made Monaco an attractive destination for individuals seeking to maximize their earnings while enjoying the opulence and luxury the principality has to offer. Among those who have been drawn to its tax-friendly status is Novak Djokovic, along with numerous other prominent figures from the world of tennis and beyond.

Novak Djokovic, arguably the most renowned Serbian athlete globally, has chosen Monaco as his home. Notably, Monaco is the primary residence for five of the top-ten ranked players in the ATP, and the reasons behind this choice are evident.

Nestled along the picturesque French Riviera, this 500-acre microstate boasts more than 300 sunny days annually, offering an ideal climate for training and leisure. Additionally, it enjoys proximity to several European capitals, with short flight connections, making it incredibly accessible. Moreover, Monaco provides access to world-class training facilities, including the prestigious Mouratoglou Tennis Academy, situated just under an hour away by car.

 

Rafael Nadal, Novak Djokovic and Dominic Thiem land - Monte Carlo preview
Rafael Nadal, Novak Djokovic and Dominic Thiem land – Monte Carlo preview

 

However, the true magnetism lies in Monaco’s status as a tax haven, with no personal income, capital gains, or investment taxes. For tennis stars like Djokovic, who currently tops Forbes’ list of the world’s highest-paid tennis players with estimated earnings of $38.4 million in the past year, the potential savings from this tax advantage could amount to millions of dollars.

Monaco, in addition to being the residence of the 23-time Grand Slam champion, also counts 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) among its residents. Holger Rune, hailing from Denmark, emphasized the significance of Monaco’s exceptional facilities and the presence of top-notch players for practice, which he couldn’t access back home.

Monaco’s appeal stretches beyond the tennis world, as it is home to some of the finest Formula 1 drivers, including Max Verstappen, Lando Norris, and Charles Leclerc. Their choice to reside here isn’t solely for honing their skills for Monaco’s legendary Grand Prix. The principality has also attracted a host of billionaires from various sectors, both in and outside the sports realm. These include Farhad Moshiri, owner of Everton F.C., with an estimated net worth of $3.1 billion, Belgian sugar heir Eric Wittouck with $8 billion, and Israeli real estate and shipping magnate Eyal Ofer, whose net worth stands at a staggering $19.4 billion.

Certainly, Novak Djokovic is far from the first athlete to enjoy the financial benefits of residing in Monaco. Swedish tennis legend Björn Borg, who clinched five consecutive Wimbledon titles and an additional six majors at the French Open, made Monte Carlo his home for over a decade, beginning in the late 1970s. However, after retiring from tennis at the age of 26, Borg faced financial challenges with his fashion business. He eventually returned to Stockholm, narrowly avoiding personal bankruptcy when the Swedish government demanded $40,000 in back taxes.

Monaco’s appeal as a tax haven is well-known in the sporting world. Dr. Andreas Bosse, an international legal consultant based in Monaco, describes it as an “open secret” that athletes and the ultra-rich flock here for the pleasant weather and significant tax advantages.

Obtaining residency in Monaco is relatively straightforward. The requirements include renting or purchasing an apartment, opening and funding a bank account with a minimum of €500,000, and establishing a utilities contract, such as for electricity. Prospective residents must also possess a clean criminal record and participate in an interview with a police officer from the Monaco Security Bureau. European and Swiss nationals can apply directly for residency in Monaco, with the process estimated to take approximately two months. However, Americans have an additional step; they first need to apply for a long-term visa in France before becoming Monaco residents.

Indeed, for U.S. citizens, there’s a significant caveat when it comes to enjoying Monaco’s tax benefits. Regardless of their place of residence globally, Americans are subject to an expatriation tax. Jerry August, co-chair of Fox Rothschild’s international taxation and wealth planning practice group, explains that even in a tax-free haven like Monaco, U.S. citizens continue to pay taxes on their worldwide income, as if they were residing in a place like Manhattan.

Interestingly, French nationals living in Monaco also face limitations in the famous Casino de Monte-Carlo’s principality. Due to a longstanding agreement, French citizens residing in Monaco are still liable for their country’s income tax. In total, Monaco has signed 35 agreements, with 33 of them currently in effect, concerning the exchange of tax information with countries worldwide, including both the U.S. and France.

It’s essential to note, however, that Monaco’s tax advantages may not be as extensive as some might assume. Athletes who compete globally are still subject to income sourcing, meaning they must pay taxes in the jurisdictions where they participate in competitions. For instance, if Novak Djokovic were to win his 24th major at the 2023 U.S. Open, where the singles champions earn $3 million in prize money, he wouldn’t owe anything to the Monégasque government. However, the IRS would still require its share of taxes from his earnings.

Taxation can also extend to sponsorship and social media income for athletes. Some countries may contend that appearances, digital posts, and online sales within their borders constitute taxable events, and therefore, a portion of an athlete’s income derived from such activities falls under their jurisdiction’s tax laws. Unlike prize money, these income sources can be more challenging to define and quantify.

Jerry August emphasizes a fundamental principle of both U.S. and international taxation: if an athlete’s labor is performed in a specific country, that jurisdiction has the right to tax them on it. This complexity can create intricate tax situations for athletes, which they are understandably keen to avoid.

 


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