The tax system in Montenegro consists of:
- Personal Income Tax
- Contributions for mandatory social insurance (pension and disability insurance, and unemployment insurance)
- Corporate Income Tax
- Value Added Tax
- Property Tax
- Real Estate Transfer Tax
- Excise Taxes
- Customs Duties
- Insurance Premium Tax
- Tax on the use of motor vehicles, vessels, aircraft, and aircraft
- Tax on the transfer of used motor vehicles, vessels, airplanes and aircraft
- Republic fees (administrative, judicial, registration)
- Fees for the use of natural resources of general interest (for forests, water, mineral resources, maritime good)
- Local taxes (taxes, surcharges, fees)
Tax reform in Montenegro occurred in early 2022. Individual and corporate profits are now taxed according to a progressive scale. Tax rates remain low, ranging from 9 to 15%. The non-taxable portion of income is up to 700EUR. Contributions for mandatory health insurance have been abolished. The tax burden on wages, including income tax and social contributions, has been reduced by 1.2 to 1.9 times.
Who pays taxes?
In Montenegro, taxes are paid by individuals and legal entities. They can be Montenegrin tax residents or non-residents. Tax rates are the same for both categories, with Montenegrin taxpayers paying tax on total income (earned in Montenegro and abroad) while non-residents pay tax only on income earned in Tax residents are exempt from paying tax on interest and premiums.
An individual becomes a tax resident of Montenegro if they spend more than 183 days in the country.
A legal entity is considered a tax resident if it is registered in Montenegro or if its place of effective management is in Montenegro.
When and in which currency is tax paid?
The fiscal year in Montenegro is the calendar year. The official currency is EUR.
Personal Income Tax
Income tax on employment income is calculated on a monthly basis, while income tax on self-employment income is calculated annually. The tax rate is the same even though the tax base is different. A portion of the income is non-taxable.Montenegro.
Local self-governments impose an additional tax, namely surtax. Surtax is paid on the calculated tax. In Podgorica and Cetinje, this rate is 15%, while in other municipalities, it is 13%.
Social contributions are paid on earnings. The rate is 15.5%, with 15% going towards pension and disability insurance, and 0.5% towards unemployment insurance.
Employers also calculate 6% on employees' wages for social contributions: 5.5% for pension and disability insurance and 0.5% for unemployment insurance.
Corporate Income Tax
Legal entities must file tax returns and pay taxes by the end of March of the current year for the previous year.
The tax burden for an employer, in combination with corporate income tax, surtax, and social contributions, varies from 20.4% on the minimum wage to a maximum of 31.3%.
Value Added Tax
Property Tax in Montenegro
Property tax is paid by buyers, owners, sellers, and lessors.
When purchasing real estate: For the first transfer of ownership, a VAT of 21% is paid, which is included in the price. For each subsequent transfer of ownership, a real estate transfer tax of 3% is paid on the market value of the property.
When you own a property: The annual property tax depends on the age, size, and location of the property. It ranges from 0.1 to 1% of the market value of the property on January 1st of the current year. For certain types of properties (e.g., seaside hotels), the tax rate can reach 5.5%. Montenegrin citizens and residents with permanent residence can request a reduction in the tax rate.
When you rent out a property, the tax rate is 15%.
When you sell a property, the tax rate is 15%, except for transfers between spouses, from parents to children, or if the property in question resolves a housing issue.
Excise
Excise products include:
- Alcohol and alcoholic beverages;
- Tobacco products;
- Mineral oils, their derivatives, and substitutes.
The excise duty is calculated by the taxpayer for each calendar month.
Customs
The basis of the customs system in Montenegro is the Law on Customs Tariff and the Customs Law.
Customs clearance of goods under this law involves receiving the import customs declaration, inspecting the goods, classifying them according to the Customs Tariff and other tariffs, determining the customs value, the amount of customs duty, and other import duties applicable to the goods, collecting the determined amounts of customs duty and other import duties.
According to the law, an investor may be eligible for customs duty exemption.
