Montenegro

Employment income

For taxation purposes, employment income encompasses compensation received on the basis of employment. 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.).

Entrepreneurial income

Entrepreneurial income is the income received from self-employment and includes the income generated from:

• main business activities;
• supplementary business activities.

Main business activities encompass the income generated from operating business activities, independent professions (such as lawyers, doctors, architects, farmers, etc.), professional and intellectual services that are registered as main business activities in the register of competent authorities. In general, income from supplementary business activities refers to income generated from temporary operating activities that are not the taxpayer's main business activities.

The tax base is the accounting profit adjusted in accordance with the PIT Law. A self-employed taxpayer can opt for lump-sum taxation if their total turnover for the year prior to the tax assessment year does not exceed EUR 30,000. Lump-sum taxation is not available to certain professions (e.g. lawyers, auditors).

Capital gains

The tax is levied on capital gains realised from the sale of real estate, shares in a legal entity, and securities.

Capital gain tax is not levied on the transfer of:

• Real estate used by the taxpayer as their only and main place of residence.
• Property made between spouses and is in relation to the marriage, divorce or inheritance of property;
• Property made as a gift to relatives in the first degree of inheritance (spouse and children).

Tax base is the difference between sale price and the price at which the taxpayer acquired the property. The capital gains tax rate is 15%.

Investment income

Investment income is subject to PIT and includes:

• Interest income;
• Profit-sharing earned by board members and employees;
• Income from the use of property and services by the owners and co-owners of capital for their private needs;
• Liquidation proceeds;
• Dividends and profit-sharing proceeds;
• Income received by board members and employees from shares and capital participation obtained under beneficial circumstances.

The tax base is the gross amount of taxable income. The applicable tax rate is 15%.

Rental income

The PIT is levied on the rental income received from the lease of immovable and movable property. The tax base is the difference between the rental income received and expenses arising from the lease of the property, up to the amount of documented actual costs, or standard costs of 30% if the actual costs are not documented. The standard costs of 50% and 70% apply to the lease of immovable property for tourism purposes.

Rental income is taxed at a rate of 15%.

Royalties

Royalties represent the income generated from copyrights, copyright-related rights and industrial property rights.

The taxable income from the royalties is calculated by subtracting the expenses from the royalties received, up to the amount of documented actual costs. If actual costs are not documented, a taxpayer will be entitled to deduct standard costs prescribed by the Montenegrin PIT Law.

The PIT rate is 15%.

Other taxable income

The Montenegrin PIT Law also imposes 15% PIT on the following income categories:

• Income from sports activities;
• Income generated from conducting their business activities online or through gaming;
• Winnings from games of chance;
• Other sources of income.