Montenegro

Montenegrin CIT Law imposes WHT on Montenegrin sourced income distributed to residents and non-residents.

Legal entities are obliged to calculate and pay 15% WHT at the moment of payment of income on the following income categories:

• Dividends and participation in the profit distributed to resident and non-residents;
• Interest, royalties and other intellectual property rights fees, capital gains, rental income, fees for consulting services, market research, and audit services paid to non-residents;
• Liquidation proceeds distributed to legal entities;
• Income earned by non-resident or resident individuals on the basis of repurchase of used products, semi-final products, and agricultural products from a manufacturer registered for VAT purposes;
• Income earned by non-residents on the basis of performing entertainment, cultural artistic, sports, or similar programmes in Montenegro.

Application of a double tax treaty (DTT) may reduce or eliminate Montenegrin WHT. To qualify for the treaty's beneficial rates, a non-resident must provide proof of tax residency of a relevant treaty country and demonstrate beneficial ownership of the income. As proof of tax residency, the non-resident must submit a tax residency certificate filled out and stamped by the relevant authority of its country of residence.

A special WHT rate of 30% will apply if the Montenegrin-sourced income is distributed/paid to non-resident entities situated in tax heavens.

Although Serbia is regarded as the legal successor of the Serbia and Montenegro State Union that ceased to exist in June 2006, the Republic of Montenegro, upon its Decision on Independence (dated 3 June 2006), continues to honour international treaties that were applicable in the State Union, including those executed by State Union’s legal predecessors (Federal Republic of Yugoslavia and Socialist Federal Republic of Yugoslavia, i.e. former Yugoslavia).

The list of the treaties is provided below:

Notes

1. If the recipient company owns/controls at least 25% of the equity of the paying company, the lower of the two rates applies.
2. A new DTT was signed with Egypt in 2005, but it is not applicable yet. Meanwhile, the old treaty is still applicable.
3. Instruments of ratification have not been exchanged between the two countries.
4. A tax rate of 5% will be applicable to literary, scientific, and work of art, films and works created like films, or other sources of reproduction tone or picture. A tax rate of 10% will be applicable to patents, petty patents, brands, models and samples, technical innovations, secret formulas, or technical procedure.
5. Only in cases when dividends are to be paid to Montenegrin residents. If paid to Malaysian residents, they are taxable at 15% in Montenegro.
6. A 5% rate is applicable for intellectual property and 10% rate for industrial property.
7. A 0% rate is applicable in cases when the income recipient is the government or government-owned banks.
8. A 5% rate is applicable in cases when the beneficial owner is a company that holds at least 5% of the capital of the payer of the income. In all other cases, a 10% rate applies.
9. A 5% rate is applicable in cases when the beneficial owner is a company that holds at least 10% of the capital of the payer of the income. In all other cases, a 10% rate applies.