Guide to Income Taxes in Montenegro 2024

The law on income tax in Montenegro regulates the cost of profit tax for all legal entities. The VAT rate in Montenegro is 21% on goods and services, with a reduced VAT rate of 7% on essential products and services such as medicines, bread, books, and computers. A 0% VAT rate is calculated for services provided to non-residents, for example, petrol for international transport. VAT registration is required if your turnover exceeds 30,000 euros per year. You will also find this guide useful if you’re considering living in Montenegro as a digital nomad.

Sources

– Montenegro Law on Personal Income Tax – Download the PDF
– Ministry of Finance and Social Welfare of Montenegro, Department of Public Revenues
– Ministry of Foreign Affairs – Agreements on Double Taxation Avoidance treaties
– https://taxsummaries.pwc.com/montenegro/individual/taxes-on-personal-income

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What are the income tax rates in Montenegro?

• Personal income tax rates in Montenegro range from 9% to 15%
• Corporate income tax rates in Montenegro are 9% on profits up to 100,000 Euros, 12% on profits between 100,000.01 to 1,500,000 Euros, then 15% on the profit above EUR 1,500,000.01.

Read to the end of the article for full details of incomes taxe rates in Montenegro!

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Read more about long-term solutions to relocating to Montenegro:

• Emigrate to Montenegro: Residence Permit & Tax Residency Guide
• Relocation Services in Montenegro
• 10 Reasons You Should Register a Company in Montenegro in 2024
• Montenegro Residency by Company Formation (2024) – A Comprehensive Step-by-Step Guide
• Montenegro Company Formation & Residency Services – Fully Managed Solution
• Montenegro Residency in 2024 – The Complete Guide

What is the subject of taxation in Montenegro?

• A resident legal entity’s taxation subject is the profit that a person/company makes inside and outside the Republic of Montenegro;
• The issue of taxation of a non-resident legal entity is the profit that that person/company makes in the Republic of Montenegro;
• A non-resident legal entity’s permanent establishment, which makes a profit on the activities it performs in Montenegro, is obliged to pay tax on that profit. A permanent establishment is a permanent place of business through which a legal entity conducts its business in whole or in part. It exists in one of the following forms: a place of administration, branch, office, factory, workshop, mine, oil or gas field, quarry, or any other site where the exploitation of natural resources takes place. A construction site or prefabricated building is considered a permanent establishment only if it lasts longer than six months. 

Who pays income tax in Montenegro?

Resident and non-resident legal entities who perform activities in Montenegro to make a profit are obliged to pay income tax. A company of several persons who carry out a business activity together is obliged to settle the tax liability.

What is the origin of a legal entity’s profit in Montenegro?

In short, these are the revenues generated by:

• real estate and movable property located in Montenegro;
• sale of the real estate and movable property if its seller is located in the Republic of Montenegro;
• sales of goods produced in the Republic of Montenegro;
• provision of services in the Republic of Montenegro;
• interest earned by a resident taxpayer and a permanent establishment of a non-resident legal entity;
• dividends paid by a resident legal entity;
• use of property rights in the Republic of Montenegro;
• the exploitation of Montenegrin natural resources;
• insurance and reinsurance 

Revenues not mentioned above and generated in Montenegro are also considered to be sources of profit. The only entities that do not pay profit tax in Montenegro are the Central Bank of Montenegro and public institutions that have just been established by the state of Montenegro (except for the profit they make by selling products and services on the market).

What constitutes the tax base in Montenegro?

The basis of corporate income tax is the taxable profit of the taxpayer. According to accounting regulations, the taxable gain is determined by adjusting the regular financial report’s income statement – modified in the tax law’s manner. It is essential to have a responsible accountant who will instruct you in this process and do her/his job responsibly, for your benefit and the benefit of the state at the same time. 

What are the income tax rates in Montenegro?

Personal Income Taxes in Montenegro

Income taxes in Montenegro are significantly lower than many other countries, with the base income tax rate being 9% for both corporate and personal income tax and 15% for higher rates of domestic and worldwide income.

According to PWC – Worldwide Tax Summaries, personal income for foreigners is taxed in the following manner:

“From January 1st 2022, Montenegro introduced a progressive taxation of salary:

Salaries up to EUR 700 (gross) are exempt from tax;

Salaries ranging from EUR 701 up to EUR 1,000 (gross) are subject to 9% tax;

Salaries from EUR 1001 (gross) are subject to 15% tax.”

“One of the biggest changes in 2022 is the introduction of a new rate of income tax for entrepreneurs:

From EUR 8,400.01 to EUR 12,000 is subject to 9% tax;

From EUR 12,000.01 is subject to 15% tax.”

Corporate Income Taxes in Montenegro

“Entities operating in Montenegro are subject to progressive corporate profit tax (CPT). Applicable tax rate depends on the realized profit of taxpayers and tax rate varies from 9% -15%. Progressive tax rate are as follows:

On the profit up to EUR 100,000, the tax rate shall be 9% fixed;

On the profit from EUR 100,000.01 to EUR 1,500,000, the tax shall be paid in the amount of EUR 9,000 fixed + 12% on the profit above EUR 100,000.01;

On the profit above EUR 1,500,000, the tax shall be paid in the amount of EUR 177,000 fixed + 15% on the profit above EUR 1,500,000.01.

Resident taxpayers are taxed on their worldwide profit. Non-resident taxpayers are taxed on their Montenegrin-sourced income or income attributed to their Montenegrin permanent establishment (PE). Non-residents are also subject to withholding tax (WHT) on income sourced in Montenegro.”

It is also important to note that as soon as you have spent 183 days or more in Montenegro you automatically become liable for personal income tax.

This is an important consideration as if your country does not have a Double Taxation Avoidance Agreement with Montenegro, then you could become liable for income in both countries.

Source – https://taxsummaries.pwc.com/montenegro – 2022/02/09

Montenegro Income Tax Comparison Chart

Montenegro Personal and Corporate Income Tax Comparison Chart

What are the tax exemptions and discounts in Montenegro?

Some companies are temporarily exempt from paying taxes. These are a newly established legal entity in economically underdeveloped municipalities, which performs production activities (this is valid for the first three years from the beginning of performing activities). Also, tax relief can be obtained by special work programs or employment of more or people with disabilities. For a taxpayer who hires new workers for an indefinite period and at least two years, the tax base is reduced by the workers’ gross salary (but increased by the corresponding contributions for compulsory social insurance paid by the employer). This relief is applied for one year from the day of employment of a new worker. Legal entities established as non-governmental organizations are exempt from income tax up to the amount of 4000 euros. The NGO must use this profit for the purposes set out in its statute.

How is it calculated, and when is income tax paid in Montenegro?

The tax period for which income tax is calculated is the financial year or calendar year, except in liquidation or commencement of activities during the year. The taxpayer is obliged to submit a tax return to the competent tax authority (according to its registered office) for the period for which the tax is calculated. A company should offer the tax return within three months from the expiration of the period for which the tax is calculated (until March 31). During the year, the taxpayer pays income tax in the form of monthly advances. The amount of that payment should be based on the tax return for the previous year. The advance payment of income tax is paid by the end of the current month for the last month in the amount of 1/12 of the tax liability according to the previous year’s tax return. 

How are legal entities’ capital gains taxed in Montenegro?

Capital gain is considered to be the income that the taxpayer generates through the sale or other transfer with compensation of land, buildings, property rights, shares in capital, and securities. A legal entity does not pay this tax at the moment of a land (e.g.) sale, but later – during the annual tax balance preparation. If the capital gain is not reinvested within 12 months, that amount is included in the tax base in the year following the year in which the capital gain was made.

And one more piece of information for the end. If seeking preferential treatment under a double taxation agreement, a person must provide proof of residence and pay taxes in the applicable country, for example, by submitting a stamped document from the relevant tax authorities. Montenegro currently has double taxation agreements with a number of countries.

The following list of countries have double taxation treaties with Montenegro at the time of writing this article:

Albania, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, Italy, Ireland, India, Korea, Kuwait, Latvia, Macedonia, Malaysia, Moldova, Malta, Holland, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and the United Arab Emirates. Income tax treaties with Spain and Qatar are pending.