The tax system of Montenegro does not stand out as particularly complex and in many ways identical to the taxation systems of other European countries. The authorities of the country have recently made great efforts to raise the prestige of Montenegro in the eyes of foreign investors. For example, one of the areas of their work is to reduce the tax burden and introduce specific tax incentives. Also, a special center for tax inspections in Montenegro was recently created, where anyone can ask any questions and get a qualified answer on the taxation system.
Let’s look briefly at examples of the main taxes in Montenegro:
– VAT (or value added tax). This tax in Montenegro is imposed on all products produced in the country, materials or services for which payment has been received, as well as products imported from other countries. The main tax rate for the current day is 21% (the last increase occurred January 2018, from the previously established 19%).
For some categories of goods, food, medicines, textbooks, a reduced VAT rate of 7% is envisaged. The authorities are constantly fighting against companies and entrepreneurs who do not want to advertise their own income, and according to the law, if the customer has not received a fiscal check for the purchase or service provided, he can immediately call the tax inspectorate and report this violation. As a result of this, everywhere in the service points, cash desks are hanging about the fact that “the buyer must take a cash receipt.”
– Income tax: this tax burdens all citizens of Montenegro and persons who do not have citizenship, but who receive profits in the territory of the country. To the sources of income, according to law, any profit or increase of own funds is attributed, based on the difference between profit and expenses for the performance of activities and is calculated thus:
- 0% from the amount up to EUR 785 if the profit is less than EUR 785;
- 15% of the amount of more than 785 euros from a profit of 785 to 2 615 euros;
- 274 euros + 19% of the amount over 2 615 euros from a profit of 2 615 to 4 577 euros;
- 647 euros + 23% of the amount of more than 4 577 euros from a profit above 4 577 euros.
From payment of income tax in Montenegro, only diplomatic employees, politicians, UN experts are released. VAT and activities related to the restoration of the economy from natural disasters, charity, aid to students, humanitarian aid, income from gifts and inheritance, and some others are not subject to VAT. The winnings in the lottery and income received in gambling tax authorities also left unattended.
– A tax on profits is levied on legal entities. The tax rate on profit in Montenegro is 9% (which is considered one of the lowest rates in Europe), for dividends – 15%, for interest income – 5%. This tax is paid by legal entities that produce goods or provide services on the territory of the country, extracting natural resources of the state that provide insurance for risks. The tax return must be submitted by February 28.
The tax system of Montenegro provides tax incentives for those legal entities that conduct their own activities in developing regions, but only during the first three years of their work.
– Tax on transactions with real estate. Under this tax, any actions with real estate related to the transfer of ownership of it, such as sale, purchase, exchange, donation, inheritance and the like, fall into this tax. Under the real estate in this law are understood as land plots, and any type of building on it, regardless of their destination.
The rate of tax is 3% of the market price of real estate (which again is considered one of the lowest in Europe), and its payer is the acquirer of the property. Some categories of individuals and organizations are exempt from paying this tax (such as diplomatic consulates, humanitarian organizations and others).
– The annual property tax paid. This tax is paid by both legal entities and individuals, owners of real estate. The tax rate varies from 0.1% to 1%, depending on many factors, such as the purpose of the premises, the distance from the sea, the quality of the premises, and so on. When paying property taxes, local residents are in a more privileged position than foreigners. For them, the tax rate starts from 0.20 euros per square meter, while foreigners pay from 0.50 euros for the same area!
In addition to the real estate tax, foreigners (as well as local residents for whom the purchased housing is not the only one) pay an additional tourist tax. Under it falls all the property located on the Adriatic coast.
In those cases when Montenegrin real estate is purchased for rent, the tourist tax is 7% and is equal to the amount of income tax. The penalty for non-payment or untimely payment of taxes for legal entities is from 20 to 200 minimum wages (at the time of writing this article – February 2018 – the minimum wage is 193 euros), and for individuals – from 2 to 20 minimum wages.