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Montenegro, a gem nestled in the heart of Europe, is not only known for its stunning landscapes but also for its favorable business environment. One of the key aspects that make Montenegro an attractive destination for entrepreneurs worldwide is its tax system. This article will guide you through the intricacies of Montenegro’s tax system and how R&P Auditing can help you navigate it seamlessly.
Understanding the Tax System in Montenegro
In Montenegro, both individuals and companies are subject to taxation. The tax rates are the same for both categories of taxpayers, with the difference being that tax residents of Montenegro are charged on their global income, while non-residents pay taxes only on income earned in Montenegro.
Individual Income Tax
The individual income tax in Montenegro is calculated based on monthly salary for employment income, and yearly income for self-employment. The rates are as follows:
- 0% for monthly salary up to €700 or annual self-employment income up to €8,400.
- 9% for monthly salary from €701 to €1,000 or annual self-employment income from €8,400.01 to €12,000.
- 15% for monthly salary over €1,001 or annual self-employment income over €12,001.
In addition to the income tax, municipalities charge an additional income tax, or surtax, which is levied at 15% in Podgorica and Cetinje, and 13% in all other regions.
Corporate Income Tax
The corporate income tax rates in Montenegro are progressive, depending on the yearly profit:
- 9% for yearly profit up to €100,000.
- €9,000 + 12% on the profit above €100,000.01 to €1,500,000.
- €177,000 + 15% on the profit above €1,500,000.01.
Withholding Taxes
The withholding tax rate is 15%. All residents, including companies, sole entrepreneurs, central and local governmental bodies, non-profit organizations and any other legal entity registered in Montenegro are obliged to withhold tax from the following payments generated in Montenegro:
Dividends, interest profit shares, interests paid to non-residents, royalties paid to non-residents, capital gain paid to non-residents income derived from consulting services paid to non-residents, rent of movable and immovable property paid to non-residents, market research services paid to non-residents, audit services paid to non-residents.
The payer is obliged to withhold the tax and pay it to the account of the Tax Authorities on behalf of the beneficiary of the payment.
The domestic withholding tax rate may be reduced when a double-tax treaty exists with more favorable rates.
For foreign companies whose headquarters are in „territories with tax sovereign”, withholding tax is 30% instead of 15%.
Value-Added Tax (VAT)
The standard VAT rate in Montenegro is 21%, with a reduced rate of 7% for certain goods like bread, milk, books, medical drugs, water supplies, hotel accommodation, bottled drinking water, and non-alcoholic non-carbonated drinks in restaurants and facilities where catering services are provided, etc. VAT rate of 0% for exports of goods out of Montenegro and international transport of goods and passengers, services provided to foreign legal entities, medicines, and medical devices, determined by the list of medicines, etc. Some goods and services are exempt from VAT, such as the export of goods and the supply of gasoline for vessels in international traffic.
How R&P Auditing Can Help
Navigating through a foreign country’s tax system can present certain challenges. That’s where R&P Auditing comes in. With our deep understanding of Montenegro’s tax system and regulations, we can guide you through the process, ensuring you comply with all the necessary requirements while taking advantage of any applicable tax benefits.
Continuous Collaboration
Our relationship with our clients doesn’t end once the company is established. We offer continuous collaboration, providing ongoing tax advice and ensuring your company remains compliant with Montenegro’s tax laws.
Contact Us
If you’re considering starting a business in Montenegro and need assistance with understanding and navigating the tax system, don’t hesitate to reach out to us.
Contact us via email, and we can arrange an online meeting via Zoom or Teams to discuss your needs and how we can assist you.
