Montenegro

Individual - Income determination

Last reviewed - 29 July 2020

Employment income

Employees' gross income includes all cash remuneration and most personal expenses (including PIT and social security contributions) paid by the employer.

The following types of income are considered as employment income:

  • Salaries or compensation generated in accordance with regulations governing labour.
  • Earnings on the basis of fees paid in addition to salary, above the amount set by the PIT Law.
  • Reimbursement of costs for business trips and accommodation in connection with these trips.
  • Relocation expenses.
  • Reimbursement for the use of one’s own vehicle for business purposes exceeding the non-taxable threshold set by the PIT Law.
  • Earnings of members of representative and executive bodies of the state or local administration.
  • Earnings of members of assemblies, managing boards, and supervisory boards.
  • All other earnings arising from employment and those similar to employment (e.g. temporary and occasional work).

Employees’ gross income also includes bonuses paid and any benefits in kind (subject to minor exceptions) received as a result of employment.

Pursuant to the legislation of Montenegro, specific employee remunerations are not taxable up to a specified cap (e.g. certain redundancy payments, solidarity help).

The last amendments to the PIT Law stipulate that meal allowance, holiday allowance, and transportation to and from work compensation are taxed in full.

Capital gains and investment income

Adopted amendments introduced taxation of capital gains realised from the sale of real estate, shares in a legal entity, and securities.

Capital gain tax is not levied on transfer of property in the following cases:

  • Transfer of a real estate used as a place of taxpayer's residence.
  • Transfer or property between spouses and parents and children.

Investment income is subject to PIT and includes:

  • interest income
  • shares in profits distributed to employees or board members
  • use of a company's property and services by the owner of the company, and
  • acquisition of a company's shares by the employees or board members under beneficial terms.

Note that while investment income is generally subject to PIT at a rate of 9%, interest income distributed to a non-resident is subject to a 5% rate.

Property income

The following property income is subject to PIT at a rate of 9%:

  • Lease income from immovable and movable property.
  • Income from time limited disposal of intellectual property (IP) and other property rights.