Montenegro
Corporate taxes and other direct taxes
Since FY2022, the corporate income tax rate has been progressive and dependent on taxable profits realized (compared to the 9% flat rate that had been previously applicable), and it applies to both resident and non-resident companies. Resident companies are taxed on their worldwide income, while non-residents are taxed only on income generated in Montenegro. The tax base is the pre-tax profit modified by several increasing and decreasing items. Capital gains are included in the annual corporate profits tax return and are subject to a 15% tax. In Montenegro, losses can be carried forward for 5 years while the carry back of losses is not permitted. A tax incentive (profit tax rate for the first eight years is 0%) is given to newly founded legal entities engaged in manufacturing in economically underdeveloped municipalities. The total amount of the tax exemption may not exceed EUR 200,000 for a period of eight years. In Montenegro, there are no specific thin capitalization rules, except that interest paid to a non-resident must be on arm’s length terms.
A 15% withholding tax is applicable to dividends, interests, capital gains, royalties and other intellectual property rights, fees for the lease of movable and immovable property, consulting services, market research, and audit services, which are paid to a non-resident legal entity. Montenegro has a wide international treaty network with over 40 double tax treaties.
A progressive transfer tax rate starting from 3% is levied on the transfer of immovable property starting from 2024. Namely, transfers of immovable property up to EUR 150,000 are taxed at 3%, transfers of immovable property in the amount above EUR 150,000 are taxed at EUR 4,500 + 5% to be applied for the amount above EUR 150,000.01, while transfers of property valued above EUR 500,000.01 are taxed at EUR 22,000 + 6% rate to be applied above EUR 500,000.01.
Property tax is levied on the ownership/use of property at rates ranging from 0.25% to 1% for real estate that is the residence of the taxpayer. Secondary real estate (not used as a residence) is taxed at rates ranging from 0.3% to 1.5%. Illegally built objects are taxed at between 0.3% and 2%, whereas undeveloped construction land is taxed at 0.3% to 5% range.
Level of attention paid by Tax Authority:
VAT and other indirect taxes
The general rate is 21%, the reduced rate is 7% (e.g. bread, milk, accommodation services, medications, tourist rent, restaurants and catering services except alcoholic beverages), and VAT-exemption is provided for donations, exports, and banking services. Taxpayers with revenues in excess of EUR 30,000 must register for VAT purposes. The options/limits are based on the VAT Act in Montenegro.
| VAT options in Montenegro |
Applicable / limits |
| Distance selling |
 |
| Call-off stock |
|
| VAT group registration |
|
| Cash accounting - yearly amount in EUR (approx.)* |
|
| Import VAT deferment |
|
| Local reverse charge |
Purchase of electricity, heating gas and other heating and cooling energy procured for further supply |
| Option for taxation |
| - letting of real estate |
|
| - supply of used real estate |
|
| VAT registration threshold* |
EUR 30,000/year |
Personal income tax / Social security system
The general rate is 21%, the reduced rate is 7% (e.g. bread, milk, accommodation services, medications, tourist rent, restaurants and catering services except alcoholic beverages), and VAT-exemption is provided for donations, exports, and banking services. Taxpayers with revenues in excess of EUR 30,000 must register for VAT purposes. The options/limits are based on the VAT Act in Montenegro.
Active incomes fall under the scope of the SSC system: an individual’s social contributions equal 15,5% altogether. These include contributions for pensions (15%) and unemployment (0.5%). The employer’s contribution is at a rate of 6.4% of an employee’s salary. This includes pensions (5.5%) and unemployment insurance (0.5%), contributions to the Labour fund (0.2%) and Labour union fund (0.2%). Also, local surtax, which is calculated on PIT assessed, is paid by the employer to the municipality of the taxpayer’s seat. Surtax rates range from 10% to15%, depending on municipality, with most municipalities having a 13% rate.
Wage related taxes
in Montenegro |
Minimum wage
|
Average wage
in private sector |
| |
in EUR |
|
in EUR |
|
| |
533 |
|
993 |
|
| Total wage cost |
567 |
106.00% |
1063 |
106.00% |
| Employer's contributions |
34 |
6.00% |
70 |
6.00% |
| Gross salary |
533 |
100.00% |
993 |
100.00% |
| Employees' contributions |
82 |
6.00% |
149 |
6.00% |
| Personal income tax |
- |
0.00% |
25 |
0.00% |
| Surtax |
1 |
0.40% |
5 |
0.40% |
| Net salary* |
450 |
84.51% |
813 |
81.72% |