Montenegro

Tax consolidation is permitted for a group of companies in which all of the members are Montenegrin residents and the parent company directly or indirectly controls at least 75% of the shares in the other companies. Each company files its own tax return, and the parent company files a consolidated tax return for the entire group.

Each company is taxed based on its contribution to the consolidated taxable profit (or loss) of the group.

Tax consolidation is binding for at least five years.

Transfer pricing

A transfer price is the price of transactions between related parties. Related parties exist if there is a possibility of control or influence over business decisions between them. Ownership of 25% or more, or a majority of shares, is considered as potential control. Influence over business decisions exists when an associated party holds 25% or more, or individually holds the greatest portion, of votes in the taxpayer's management bodies. If the same persons participate in management or control of both companies, a connection between them will be deemed to exist. Family member of a person that has 25% or more of voting power or has 25% or more of profit share is considered a related party.

Transactions between related parties must be valuated at arm's length. If the transaction with a related party is not in accordance with the arm's-length principle, the tax authorities are required to adjust the taxpayer's tax base.

Montenegro CIT Law recognises the following methods for determining arm’s-length prices:

• Comparable uncontrolled price (CUP).
• Cost plus.
• Resale minus.
• Transactional net margin (TNMM).
• Profit split.
• Any other method that allows determination of arm’s-length prices if none of the above methods can be applied.
• A combination of methods from the above, if necessary.

There is a prescribed materiality threshold (EUR 75,000) for documenting transactions in short form.

Large taxpayers are obligated to submit the documentation, while other taxpayers should have the transfer pricing documentation in place and provide it on the request of the tax authorities within 45 days.

The submission deadline will be 30 June in the first couple of years (until 2027), after which the documentation shall be submitted alongside the tax return (no later than three months from the expiration of the fiscal period).

The Ministry of Finance will publish rates that are in line with the arm's-length principle for loans and other financial instruments. Also, the Ministry of Finance shall prescribe a more detailed manner of determining transfer prices and the content of documentation, in accordance with the OECD Guidelines and other international organisations.

Country-by-country (CbC) reporting

A legal entity, resident of Montenegro for tax purposes, that is a member of an international group operating in an EU member state or another state or territory of the state is required to submit to the tax authorities consolidated data, according to these countries, on realised revenues, profit/loss before taxation, calculated and paid CIT, declared capital, accumulated profit, number of employees, and tangible assets for each member of the international group. CbC reporting in Montenegro is applicable as of 1 January 2024. 

Thin capitalisation

There are no thin capitalisation provisions in place in Montenegro.

Controlled foreign companies (CFCs)

There are no CFC rules in Montenegro.