Taxation in Montenegro

Foreign companies

Foreign investor can operate in Montenegro either as a legal entity or as a natural person. The term "foreign investor" applies to a company that has been set up in Montenegro by a foreigner, or foreign legal entity, whose share of investment capital is higher than 25 % of total capital invested.

The foreign companies can be registered as Joint Stock Company or as Limited Liability Company. In the case of Joint Stock Company is being registered, the foundation capital (deposit which can be used immediately) is 25,000.00 €. For the Limited Liability Companies, the deposit is minimum 1.00 €.

There is no limit on the amount of capital invested in Montenegro. Foreign investors are encouraged to invest freely within any industry and to transfer all assets, including profits and dividends. Foreign investors can acquire rights to real estate, such as commercial property, office space, residential space or construction land.

Montenegro adopted Euro (€) in the same time when it was introduced in EU countries. If you make an investment you know exactly how much is your profit, since inflation in Montenegro is calculated on a Euro base.

Corporate tax and Value added tax

Resident companies are taxed on their worldwide income, while non-resident companies are subject to taxation on their income sourced in Montenegro.

Dividends and other earnings from shares are subject to withholding tax, but are not included in the taxable income for corporate tax purposes.

Capital gains, realized from the disposal of shares, securities, intellectual property rights and real estate are taxed as income.

The corporate tax rate is 9%. The same rate applies to capital gains.

Tax Compliance

Corporate income tax is paid annually within 3 months after the end of the tax year and together with the submission of tax returns.

Withholding Tax

(Subject to double tax treaties)

Dividends, interest and royalties are taxed with a final withholding tax at the rate of 9%. Dividends are not treated as taxable income when paid between residents, whereas incoming dividends, received from abroad, are treated as such. A tax credit system is available, thus allowing the resident taxpayers to obtain a tax credit for taxes paid abroad.

Where a more favorable tax treaty exists, the abovementioned rates will be reduced. Montenegro has concluded a number of double tax treaties and is negotiating several others.

Montenegro continues to honor double-taxation treaties signed by the former Socialist Federal Republic of Yugoslavia or by the Federal Republic of Yugoslavia, as well as those by the state union of Serbia and Montenegro.

Capital Gains

Capital gains and rental income from movable and immovable property paid to non-residents are subject to a final withholding tax of 9%. Capital gains will be taxed in total by the end of the financial year.

Value Added Tax (VAT)

VAT	%
Standard rate	21%
Reduced rate	7
Zero rate	0

VAT applies to most transactions at a standard rate of 21%, while basic food products, certain medicals, hotel accommodation services, public transport services etc. are taxed at a reduced rate of 7%. Exports are zero-rated. Taxable persons with an annual turnover of less than EUR 18,000 are exempt from paying VAT, and consequently are not obliged to register.

Taxation of individuals

Resident individuals are taxable on their worldwide income, while non-residents are only taxed on their income sourced in Montenegro. Residency is determined by the time spent in the country, which should be over 183 days in a year or has a place of habitual abode or centre of vital interests in Montenegro.

Rates

Employment income, business and professional income, income from royalties, as well as income from immovable property are aggregated and taxed at a flat rate of 9%. Capital gains from the sale of immovable property, shares, and other participation rights will be taxable at a rate of 9%.

Social Security Contributions

Compulsory social security contributions are due by both the employer and the employee. The collective social security burden amounts to around 67% of gross wages.

Double tax treaties

All double tax treaties that Montenegro has concluded can be found on the Department of Public Revenues's website: Treaties

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Foreign companies in Montenegro have equal rights as local companies

Foreign companies

Corporate tax and Value added tax