Investing Made Simple – Ultimate Guide to Montenegro Taxes

As of 1st January 2022, the Montenegrin taxation system is progressive, meaning that the tax paid on personal and corporate income is determined by the level of your income. And still, Montenegro taxes are one of the lowest in the whole of Europe, making this beautiful Mediterranean country a great place to relocate or start a business.

The most important consequences of this change are the progressive tax rates for salaries and capital gain, the abolishment of health insurance liabilities, and the increase of the withholding capital gains tax rate.

If you’re interested in making an investment in the real estate market or any other type of business in Montenegro, we’re here to help. Continue reading and learn everything about taxes in Montenegro you need to know.

Montenegro has long been considered a tax haven among many foreigners and residents themselves. Until the year 2022, it has been well known for its FLAT flow tax rates that didn’t exceed 9% for both personal and corporate income TAX.

As of 1st January 2022, the Montenegrin government introduced a progressive taxation system. This changed the taxation regime slightly, but Montenegro still keeps a high place on the list of countries with favourable tax regimes.

Although this new regime means a slightly higher tax rate for those with a large income, it is still attractive compared to the rest of the world. So, does this make Montenegro a tax haven?

Montenegro has a transparent taxation system, which makes it unsuitable for offshore companies that intend to engage in tax evasion practices. However, Montenegro does grant numerous legal benefits, such as:

 – a chance to obtain Montenegrin citizenship through investment

 – a stable economy inclined to foreign investments

 – low personal and corporate tax rates

 – double taxation AVOIDANCE treaties signed with over 40 countries

 – low cost BUT HIGH STANDARD of living

 -EURO currency safety

All of these circumstances make Montenegro a great place for investment. However,  in order to invest smartly, you must fully understand how the taxation system works. In the next sections, we will help explain everything you need to know about Montenegro taxes.

Both residents and non-residents pay taxes in Montenegro, but the income on which they are levied is different.

A tax resident is a person who has a domicile or a centre of personal and economic activities in Montenegro. Additionally, a person must spend at least 183 days in a tax year in the country to be considered a tax resident.

Tax residents must register with the local tax authorities. Both personal and corporate taxes are paid annually. At the end of April, all tax residents must submit an annual tax return for the previous calendar year. The exception is those who have only employment income who are paying monthly taxes.

Residents are taxed on their worldwide income, while non-residents are taxed only on their income earned in Montenegro and are subject to withholding tax on that income. This includes income from a permanent establishment, rental income from immovable property, interests, and royalties.

If a double taxation treaty has been made between Montenegro and your country, you are entitled to tax relief on the income from that country if you already paid tax on it there. This helps you avoid double taxation on both your personal and corporate taxes, as well as on real estate.

So far, Montenegro has signed double taxation treaties with over 40 countries.

In Montenegro, personal income tax is paid by both residents and non-residents. It is paid on gross income, including employment and investment income, interest, dividends, royalties, etc.

Montenegro income tax rates on personal income are as follows:

• Income of EUR 700.00 or lower are exempt from tax
• Income between EUR 700.01 and EUR 1,000.00 are subject to 9% tax
• Income of EUR 1,000.01 and higher are subject to 15% tax rate.

Income earned by individual entrepreneurs is taxed as follows:

• Income from EUR 8,400.01 to EUR 12,000.00 are subject to 9% tax
• Income of EUR 12,000.01 and higher are subject to 15% tax
• Additionally, a taxpayer must pay a surtax to the municipality in which they are domiciled. The surtax is paid on the amount of personel income tax you paid . The rate of this surtax is 13% in all municipalities except Cetinje and Podgorica, where the rate is 15%.

Montenegro taxes on corporate income are paid by both companies established in

Montenegro and foreign companies operating in the country. A foreign legal entity is considered a Montenegrin tax resident if it has a permanent establishment or a place of effective management in Montenegro.

A permanent establishment refers to a fixed place of business in Montenegro through which a foreign company operates. To become tax residents, companies must register with tax authorities. They pay corporate tax annually on their income made in Montenegro.

The Montenegro corporate tax rate is progressive, meaning that the amount paid in taxes depends on the profit a company has realised. M ontenegro tax rates for capital income range from 9% to 15%, and are as follows:

• Taxable Profit up to EUR 100,000 is subject to tax rate of 9%
• Taxable Profit from EUR 100,000.01 to EUR  1,500,000.00 is subject to 12% tax rate
• Taxable Profit over EUR 1,500,000.00 is subject to tax in the amount of EUR 177,000.00 + 15% tax rate on the amount over EUR 1,500.000.01

In Montenegro, capital gains tax is paid by both companies and individuals and it amounts 15%. The capital gains that are subject to taxation are those realised from the sale of real estate, shares and other securities.

If a non-resident owns real estate in Montenegro and decides to sell it, they will have to pay a 15% withholding tax on the capital gains.

There are some cases in which capital gain tax is not levied, and they include:

• transfer or property between parents and children and between spouses
• transfer of a property that is used as a place of taxpayer’s residence

Are you planning on relocating to Montenegro to make it your new home, or do you wish to open a business in this prosperous coastal country? Whatever your answer is, there are certain taxes you need to pay when buying property in Montenegro.

But property taxes aside, keep in mind that there are numerous benefits of purchasing coastal real estate in Montenegro. Apart from the evident proximity to tourist attractions, the coastal area offers you higher property values and the luxury of living in an upper-class neighbourhood.

Luxury real estate, such as Porto Montenegro’s Elena Residences and Regent Pool Club Residences, offer you property management solutions and a revenue-generating rental programme.

Additionally, the magnificent SIRO residences at Boka Place offer their owners an exclusive chance to obtain Montenegrin citizenship by investment.

 Property tax in Montenegro is paid by both the seller and the buyer of the property, though they are liable to different taxes. These are the types of property taxes in

 Montenegro a property owner is obliged to pay:

• purchase tax or title transfer tax (transfer tax is not payable if property is sold or gifted to a child or a spouse)
• transfer tax on property, or a VAT on new property if it is first sale and it is purchased directly from the property developer
• annual property tax
• taxes on rental income
• capital gains taxes, if they choose to sell their property

The property transfer tax rate in Montenegro is rather favourable compared to other European countries. It amounts to 3% of the market value of the property and is paid by the buyer after the signing of the purchase contract. Buildings Property that haven’t been transferred previously are subject to 21% VAT.

The annual property tax is progressive but ranges only  from 0,25% to 1,00% of the property market value. This tax is paid annually by property owner.

The general Montenegro VAT rate is 21% and is paid for all goods sold and services provided in the country. Additionally, the value-added tax is paid for imported goods as well.

However, some goods and services are taxed at a reduced rate, such as:

• bread, milk, medicine, textbooks, computers – taxed 7%
• exported goods, goods and services for diplomatic representatives etc. – 0% rate

Not all legal entities are obligated to pay value-added tax. While VAT registration for companies with turnovers exceeding 30,000 EUR in a 12-month period is mandatory, those who realise a turnover below 30,000 EUR in the same period can choose if they want to register for VAT or not.

Once you register, you don’t have the right to deregister for the next three years. VAT is paid monthly, meaning you must submit a VAT return and clear your VAT liabilities every calendar month.

Whether you want to open a company in Montenegro or relocate to this constantly growing country to pursue a comfortable life, understanding taxes will help you manage your finances effectively.

We hope our guide to Montenegro taxes has been of help. If you are in search of luxury real estate, we advise you to get acquainted with Porto Montenegro residences which will give you not only an amazing place to live but also the chance to become a citizen of this amazing country!