Corporate taxes in Montenegro

We continue our series of articles about opening and managing business in Montenegro. In this article, we will speak about corporate taxes. Having established the company, you should be aware of the main taxes the company will face and have to be paid either in monthly or yearly cycles. Together with the local expert Jacco Landsmeer, the owner of Ekonomik Accountants d.o.o. and Ekonomik Asset Management d.o.o., we have put together an overview of the main tax categories.

Corporate Tax

Businesses in Montenegro pay tax at a rate of 9% on their profits.  This tax is due by both registered businesses and those that trade in Montenegro.   A business that is incorporated in Montenegro will be a tax resident of Montenegro.  A business is also a tax resident of Montenegro if it is managed from Montenegro, even though it might be registered in a different country.


Montenegro charges VAT (value added tax) in line with the European Union.  The rate of VAT in Montenegro is 21% on goods and services with a reduced rate of 7% VAT on essential goods and services like medicine, bread, books and computers.  A VAT rate of 0% is charged on services rendered to non-residents as well as certain goods provided to non-residents, for example, gasoline for international transport.   It is compulsory to register for VAT if your turnover exceeds 18 000 euro per year.  A business with lower turnover may also choose to register for VAT.


Property Tax

Montenegro charges property tax on properties located in Montenegro.  This tax is between 0.25 and 1% of the market value of the property as at 1 January of each year.  When purchasing property, the new owner must submit a tax return within 30 days of the purchase.  Thereafter all property owners must submit yearly returns for their property tax.


Transfer Tax

Immovable property, for example, land and buildings, are subject to a 3% transfer tax.  The 3% is calculated on the market value of the property at the time it is acquired.  The person or legal entity acquiring the property is required to submit a tax return and to pay the amount due within 15 days of concluding the contract. Certain new developments might be exempt from this tax.


Taxes applicable to salaries and wages

Personal Income Tax:
Employers are required to withhold personal income tax from the salaries and wages of their employees and pay this over to the tax authorities.  Currently, Montenegro has 2 flat rates.  All employees pay 9% on the amount that is less than or equal to an average monthly salary.  In addition, employees who earn more than the average monthly salary will pay 11% on the amount that exceeds the average monthly salary.  The tax authorities publish the amount that they consider to be the average monthly salary of Montenegro on an annual basis.

Employers are also required to collect additional taxes and contributions from the salaries and wages of their employees as well as to contribute themselves.  The current rates are:
Social security  5.5% Due to employers
Health insurance 4.3% Due to employers
Unemployment insurance 0.5% Employees and employers each pay 0.5%
Pension and disability insurance 15% Due to employees
Health insurance 8.5% Due to employees


Capital Gains Tax

Montenegro charges capital gains tax at a rate of 9%.  Any capital gains or losses can be rolled over for a period of 5 years to allow the taxpayer to offset any gains or losses against each other.  Capital gains by non-tax-residents are subject to a 9% withholding tax.

Withholding tax

The withholding tax rate for dividends, interest, and royalties is also 9%.  Income paid out to a non-resident will be subject to this withholding tax of 9%.  This income includes capital gains, dividends, interest earned, profit distributions, royalties, fees for the use of intellectual property, rental income, consulting fees, fees for market research, auditing services and even performance and sporting fees.

Montenegro does have double tax agreements with several countries which could reduce or eliminate this withholding tax.  In order to claim preferential treatment under a double taxation agreement the person will have to provide proof of their residence and that they pay taxes in the applicable country, for example by providing a stamped document from their own relevant tax authorities.

Currently Montenegro has double taxation agreements with Albania, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Egypt, Finland, France, Germany, Hungary, Iran, Italy, Korea, Kuwait, Latonia, Macedonia, Malaysia, Moldavia, Netherlands, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine and the United Kingdom.

In the next articles, we will tell you about the accounting compliances and wages in Montenegro.

If you need support on accounting support and managing your taxes we can advise companies with very good and long experience of working with foreigners.