Montenegro

Value-added tax (VAT)

The main principles of the Montenegrin VAT are in line with the European Union (EU) Sixth Directive guidelines. Taxable supplies are subject to a general 21% VAT rate; however, certain supplies are taxed at a reduced 7% rate (e.g. bread, milk, books, medicines, etc.) and 0% rate (e.g. export of goods, supply of gasoline for vessels in international traffic, etc.).

In principle, the VAT base is comprised of consideration (in cash, goods, or services) received for supplies, including taxes, except VAT (e.g. customs, excise duty), and direct costs (e.g. commissions, cost of packing, transport). If the consideration is not paid in cash, the tax base will be the market value of the goods or services received at the time of supply. Furthermore, if an exchange of goods for services takes place, the tax base represents the value of the received good or service.

Registration for VAT in Montenegro may be either voluntary or mandatory. Voluntary VAT registration is possible for taxpayers who have not realised turnover exceeding EUR 30,000 in the last 12-month period. Once registered, a company may not apply for deregistration for at least three years. VAT registration is mandatory for an entity that realises turnover exceeding the EUR 30,000 threshold in any 12-month period.

VAT is calculated and paid on a calendar-month basis. VAT calculated 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 duty:

• Alcoholic and alcohol beverages (beer, wine, other fermented beverages, intermediate products and ethyl alcohol),
• Tobacco products, including non-combustible tobacco (cigarettes, cigars, cigarillos, smoking tobacco (fine-cut tobacco for rolling cigarettes and other smoking tobacco), products intended for inhaling steam without burning, chewing tobacco and snuff),
• Mineral oils, their derivatives and substitutes, and coal,
• Still and sparkling water with added sugar or other means for sweetening or flavoring and non-alcoholic beer,
• 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.

Fiscalisation

Montenegrin Law on fiscalisation in supply of products and services entered into force on June 1, 2021. Fiscalisation is a process in which an entity obliged to comply with fiscalisation, for cash and non-cash payments, is submitting to the Tax Administration data on supply of products and services and fiscal receipts/invoices in real time, using a permanent internet connection and fiscal service.

Entities obliged to comply with fiscalisation are:

• natural person who is a taxpayer of income tax and is obliged to issue fiscal receipt for the delivery of products or services;
• legal entity that is obliged to pay corporate income tax in accordance with the law governing corporate income tax and which is obliged to issue fiscal receipts or invoices for the delivery of products or services;
• taxpayer who realizes turnover from the sale of goods or services through self-paying devices (vending machines), and who is not obliged to issue fiscal receipt in accordance with the law governing value added tax.

Fiscalisation applies to all cash and non-cash payments for which there is obligation to issue an invoice (B2B, B2C and B2G).

Property tax

Property tax is payable by legal entities who own or have user rights over 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 of 3% is payable on the acquisition of ownership rights over immovable property.

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.

Stamp taxes

No stamp taxes are in place in Montenegro.

Payroll tax

Employment income includes all receipts paid or provided to an individual based on employment (salaries, pensions, benefits in kind, insurance premiums, benefits, and awards above the non-taxable thresholds). Income generated through other types of personal engagements similar to employment (e.g. temporary jobs) is also considered employment income.

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

As of 1 January 2022, progressive taxation of salary and income earned by entrepreneurs is introduced. Proportional 15% tax rate is introduced to other types of income.

Monthly salary is taxed in the following manner:

• Salaries up to EUR 700 (gross) are exempt from tax.
• Salaries ranging from EUR 701 up to EUR 1,000 (gross) are subject to 9% tax.
• Salaries from EUR 1,001 (gross) are subject to 15% tax.

Monthly income earned by entrepreneurs is taxed in the following manner:

• From EUR 8,400.01 to EUR 12,000 is subject to 9% tax.
• From EUR 12,000.01 is subject to 15% tax.

Social security contributions

Social security contributions for pension and disability insurance, health insurance, and unemployment insurance are calculated and withheld by an employer from the salary paid to an employee. Unlike the other two types of social security contributions, pension and disability insurance contributions are subject to a specific annual cap (EUR 61,519 for 2023).

Social security contributions are payable by the employer and employee at different rates. The amount borne by the employer is treated as an operating cost while the portion payable by the employee is taken from the gross salary.

The rates paid by the employer are as follows:

• Pension and disability insurance: 5.5%.
• Unemployment insurance: 0.5%.

The rates paid by the employee are as follows:

• Pension and disability insurance: 15%.
• Unemployment insurance: 0.5%.

Environmental charges

Legal entities are subject to environmental charges for the following:

• Use of firing or electrical feed equipment with power greater than 1MW.
• Import of substances harmful to the atmosphere.
• Production or deposit of dangerous waste.
• Other charges (for space denominated for consumers of tobacco products and electroacoustic and acoustic devices).