Taxes in Montenegro
Montenegro has a small economy and a government very keen on making it bigger through foreign-direct investment, but also EU membership is Montenegro’s top policy goal, so Montenegrin tax policy is rather fair and transparent with low tax rates.
A company is recognized as a resident of Montenegro for tax purposes if it is registered in Montenegro or maintains control over its activities and has headquarters in Montenegro.
A private person may obtain tax residency in Montenegro if he/she stays there for 183 days or more in a calendar year or has his/her center of vital interests in this Balkan country.
In 2022, the tax rate of the income for private persons is 9% of the tax base.
Sources of revenues include:
- personal earnings
- self-employment activity
- property and property-based rights
- capital gains.
Income from property capital, capital gains and sport activities is still subject to a flat rate, which has been increased from 9% to 15 %
Company Profit Tax in Montenegro is now progressive. The annual profit of companies is taxed as follows:
- Profit of up to €100,000.00 is subject to 9%tax
- Profit from €100,000.01 to €1,500,000.00 is subject to the CPT of €9,000 + 12%of the profit amount over €100,000.01
- Profit over €1,500,000.01 is subject to the CPT of €177,000.00 + 15%on the amount over €1,500,000.01.
Income generated from property capital, capital gains, and sports activities is taxed at the flat rate of 15 % (an increase compared to the 9% tax before 2022).
Real estate transfer tax of 3% is payable on the acquisition of ownership rights over immovable property.
The taxable base is the market value of the immovable property at the time of the acquisition. A taxpayer (i.e., the acquirer of immovable property) is obligated to self-assess a tax liability, submit a tax return, and settle a tax liability within 15 days from the contract date.
If the building (house, hotel, factory, etc.) has not changed the owner before, then the VAT rate of 21% is included in the price and in this case new owner does not have to pay real estate transfer tax.
Property tax is paid annually at the rate that ranges from 0.25 % to 1 %.
The Value Added Tax is in line with the European Union (EU) Sixth Directive guidelines. Taxable supplies are taxed at the 21% VAT rate. The reduced 7% rate is stipulated for certain supplies (e.g., bread, milk, books, medicines). The 0% rate is applicable to the export of goods, supply of gasoline for vessels in international traffic.
A bilateral double taxation treaty (DTT or DTA) defines which of the two countries is entitled to collect taxes from a particular taxpayer if this legal entity or private person resides, has business assets and activities in both jurisdictions party to the agreement.
Resident taxpayers are entitled to a tax relief up to the amount of tax paid in another country on income realized in that country. This tax relief is equal to the tax paid in another country, but may not exceed the amount of the tax that would have been paid in Montenegro.
At this point, no treaty is in place with Australia, Canada, Spain, the USA, United Arab Emirates, and many other countries. However, Montenegro has double tax treaties with most major EU states, the UK, China, Russia, Switzerland, Azerbaijan, Belarus, Egypt, India, Korea, Kuwait, Malaysia, Moldova, Moldova, Sri Lanka, Turkey, Ukraine, United Arab Emirates.