Overview of Taxes in Montenegro

Income tax

There are two types of income tax to consider, personal income tax and corporate income tax. Here is a breakdown of each type of income tax in Montenegro.

Personal Income Tax Rates

Personal income tax is levied on the gross income of tax residents in Montenegro. Investment income, employment income, royalties, interest, dividends, and other income streams are subject to income tax.

Personal income is taxable at a flat rate of 9%. The tax rate may become 11%, but this is only levied on any taxable income that surpasses the average income. Montenegro announces its average for each year (approximately 765 Euros for 2020), and any income below or equal to the national average is taxable at a flat rate of 9%, while any extra income surpassing the average is taxable income at a rate 0f 11%.

To be considered as a tax resident and be subject to Montenegrin taxes an individual must be a full-time resident for at least 183 days a year, tax residents are taxed on regional and worldwide income that enters Montenegro. A non-resident who spends less than 183 days a year is not subject to any Montenegrin income tax.

Personal income tax is paid on annual basis, and tax residents must register with their local tax authorities. There is a local surtax that must also be paid, and the surtax of 13% is paid in all municipalities with the exception of Podgorica and Cetinje, where the paid rate is 15%. Local surtaxes are paid directly to the municipality one is registered in.

Corporate Income Tax Rates

Companies and permanent establishments incorporated in Monetengro are subject to corporate income taxes. A permanent establishment is a fixed place of business through which a non-resident carries out business in Montenegro.

Corporate tax is levied at a flat rate of 9% on income. Montenegrin law does provide exemptions on a service rendered outside of Montenegrin soil in the case a double taxation treaty is in place with the destination country.

Any income in Montenegro is taxable income and a business must register with tax authorities to ensure profit from selling goods or services is taxed legally. Companies pay corporation tax on an annual basis.

The corporate tax rate in Montenegro is one of the best tax rates in the entirety of Europe, which is why many companies from different countries flock to establish their HQ on Montenegrin soil. Low taxes are vital for a company to remain viable in a financial sense, especially for start-ups, and the Montenegrin government understands that and has provided an outstanding business environment that will undoubtedly interest any company in setting up shop and conducting its operations and services in the European nation.

If Montenegro becomes an EU member and maintains a great corporate tax rate then entrepreneurs and business owners should profoundly consider moving their company, or even companies, to Montenegro to take advantage of the low taxes.

Value-Added Tax (VAT) in Montenegro

Value-added tax (VAT) is another financial commitment taxpayers must face in Montenegro. VAT is payable on all goods and services sold within the country. VAT is also paid on imported goods.

Any business that has a gross turnover (before expenses) of 18,000 Euros or more in one year must pay VAT. There are exemptions, however, depending on the type of services or goods being sold.

A reduced rate of 7% applies on any good or service listed below:

• Basic commodities such as milk, sugar, bread, and oil
• Medication and orthotic or prosthetic instruments;
• Educational material such as textbooks
• Services in accommodation such as hotels, resorts, motels, and other tourist accommodation;
• Potable water, with the exception of bottled water;
• Services of public transportation of passengers as well as their baggage
• Services of public hygiene;
• Funeral services and any goods related to those services;
• Copyrights
• Services related to the use of sporting facilities for non-profit purposes;
• Agricultural goods and services

There is even a further reduction to a 0% VAT rate on a service or good related to the following industries:

1. Exported goods to foreign countries;
2. Supply of ancillary services
3. Services performed on goods imported to Montenegro from a foreign country
4. Supply of fuel and other necessary goods used for supplying:
5. Goods and services related to international air or maritime traffic;
6. Goods and services intended for diplomatic and consular representatives
7. Medicines and devices for medical use, determined by the government