Montenegro

Value-added tax (VAT)

The main principles of the Montenegrin VAT align with the European Union (EU) Sixth Directive guidelines. The subject of VAT includes the supply of goods and services for consideration, as well as the import of goods into Montenegro. The general VAT rate is 21%. Certain supplies of goods and services, and the import of goods are subject to reduced VAT rates:

• 15% VAT rate (e.g. books, publications, certain hospitality and accommodation services, copyrights in the field of education, literature and arts, ticketed services for cultural and sports events);
• 7% VAT rate (e.g. bread, flour, milk and dairy products, schoolbooks, medicines, orthopedic and prosthetic devices, public transportation services);
• 0% VAT rate (e.g. export of goods, supply of gasoline for vessels in international traffic, products and services related to international sea and air transportation, deliveries of goods to and within free zones and customs warehouses).

In principle, the VAT base consists of consideration (in cash, goods, or services) received for the supply of goods and services, including subsidies related to such supplies (excluding VAT), other taxes (e.g. customs, excise duties), and indirect costs (e.g. commissions, packaging and transportation costs). VAT is excluded from the VAT base.

If the consideration is not fully or partially paid in cash, the VAT base is the market value of the goods or services at the time of their supply. In case of the exchange of goods for services, the VAT base is the value of the goods or services received.

VAT registration in Montenegro can either be on mandatory or voluntary basis. VAT registration is mandatory for entities whose turnover exceeds the EUR 30,000 threshold within the last 12-month period. Voluntary VAT registration is available for taxpayers whose turnover does not exceed EUR 30,000 in the last 12-month period. Once registered, a company can not apply for deregistration for a minimum of three years. 

VAT is calculated and paid on a calendar-month basis. VAT on imports is paid along with customs duties to the Customs Authorities.

Customs duty

Customs duties are paid on goods imported into the customs territory of Montenegro in accordance with the rates and tariffs set forth in the Customs Tariffs, which is in line with the harmonised system of tariff codes prescribed by the World Trade Organisation (WTO). Customs duty rate depends on the tariff number of goods imported, their origin, and the value.

Customs rates stipulated by international agreements are only applied to goods with preferential origin from countries covered by such agreements. The most important free trade agreements that Montenegro signed are with the European Union, the European Free Trade Association (EFTA), the Central European Free Trade Agreement (CEFTA) states, Russia, Turkey, and Ukraine.

Excise duty

Legal entities that are importers or producers of the following products are subject to excise duties:

• Alcoholic and alcohol beverages (beer, wine, other fermented beverages, intermediate products, and ethyl alcohol);
• Tobacco products, including smokeless tobacco products;
• Mineral oils, their derivatives and substitutes, and coal;
• Electrical energy;
• Still and sparkling water, and other non-alcoholic beverages with added sugar or other sweeteners, and flavourings;
• Liquid for charging electronic cigarettes.
• Single-use plastic products.
• Products from sugar, cocoa, and ice cream.

Tax on coffee

Montenegro has a specific tax on coffee, which is payable on coffee imported and produced in Montenegro. The tax rate varies from EUR 0.80/kg to EUR 1.30/kg, depending on the type of the coffee. Tax on coffee is also payable for products and beverages that contain coffee. The tax rate for these products is EUR 2.50/kg for one kg of net coffee contained in the final product.

Property tax

Property tax is payable by legal entities who own or have usage rights on real estate located in Montenegro. The annual tax is levied at proportional rates, ranging from 0.25% to 1% on the market value of assets as of 1 January of the current year. In case of acquisition of new property, the taxpayer is obligated to submit a tax return to the tax authorities within 30 days from the acquisition date (i.e. registration return for property tax) and to declare annual property tax by the submission of annual returns. Tax is payable in two instalments, based on decisions issued by the tax authorities.

Property transfer tax

Transfer tax on the acquisition of ownership rights over immovable property is progressive, with rates ranging from 3% to 6%.

The taxable base is the market value of the immovable property at the time of the acquisition. A taxpayer (i.e. the acquirer of immovable property) is obligated to self-assess a tax liability, submit a tax return, and settle a tax liability within 15 days from the contract date, or another legal transaction or event through which immovable property is acquired.

Stamp taxes

No stamp taxes are in place in Montenegro.

Payroll tax and other personal income taxes

Employment income includes all receipts and forms of compensation received on the basis of employment. A payroll tax basis includes employee's gross salary, compensation of salary, and other earnings, as determined by the Labour Law. The employer is responsible for calculating, withholding and reporting personal income tax (PIT) and social security contributions (SSC) on behalf of employees.

The Montenegrin PIT Law exempts certain types of employee's remuneration and expense coverage from taxation up to a specified cap (reimbursement of costs for business trips including accommodation costs, severance payments, solidarity allowances, jubilee awards etc.).

While employees are the taxpayers, the employer is responsible for calculating and withholding personal income tax on behalf of its employees.

Salaries are taxed based on the following tax rates:

• Salaries up to EUR 700 (gross) are tax-exempt;
• Salaries between EUR 701 and EUR 1,000 (gross) are subject to 9% tax;
• Salaries exceeding EUR 1,000.01 (gross) are subject to 15% tax.

Entrepreneurial income is taxed based on the following tax rates:

• From EUR 8,400.01 to EUR 12,000 are taxed at 9%;
• Earning exceeding EUR 12,000.01 are taxed at 15%.

Other categories of personal income are taxed at proportional 15% rate.

Social security contributions on salaries

The mandatory social security contributions in Montenegro payable on salaries include:

• pension and disability insurance;
• unemployment insurance.

For 2024, pension and disability insurance contributions are capped at EUR 68,765 annually.

The entire pension and disability insurance, set at a rate of 10%, is borne by employee. Costs of unemployment insurance are borne by both employee at rate of 0,5% and by employer at rate of 0.5%.

Employers are liable to calculate and withhold mandatory social security contributions at the payment of employees' salaries. The mandatory social security contributions borne by employer represent their operating expenses.

SSC are also levied on other types of personal income in accordance with the SSC Law.

Environmental charges

Legal entities are subject to environmental charges which include but are not limited to:

• Importing of substances harmful to the ozone layer;
• Releasing the pollutants into the air;
• Production and disposal of dangerous waste.