Tax System: Montenegro

International migration has never been as popular as it is today. People around the world are realizing that they can move to different countries in different parts of the world to enjoy an improved lifestyle, better tax systems, and a variety of other benefits that are available to migrants.

Some of those people have chosen to make Montenegro their new home. It is a lesser known in country in Europe, but it is on track to become a full EU member possibly by as early as 2025. Which means that many people are very interested in the tax system in Montenegro and how it might benefit them should they choose to make it their new home. 

So, let’s take a closer look at the tax system in this Balkan country. here’s what you need to know.

Montenegro Tax Guide

Montenegro is not what you would call a classic tax haven. It does still have some taxes on personal and corporate income. There are still some tax regulations, and if you are a resident of the country, you will be subject to the tax structure.

However, compared to many countries the tax structure in Montenegro is very favorable for both individuals and for businesses. which may be a contributing factor in the increasing interest in immigrating here.

Tax Advantages in Montenegro

The biggest benefit of the tax system in Montenegro is that it’s fairly simple compared to most European and Western countries.

Most individuals and businesses will pay a flat income rate of 9%. Most goods and services include VAT of 7%. So, while this isn’t a country that is completely tax free, the rate you pay will be significantly lower than most other places. It’s also a lot easier to calculate without complicated tax brackets. 

Tax System in Montenegro

The tax system in Montenegro is fairly straightforward. Individuals and businesses register as taxpayers, pay income tax on their gross earnings, pay VAT on most purchases, and pay some limited real estate and capital gains tax. 

Montenegro’s Income Tax System

The Montenegrin income tax system is very simple compared to most other countries. you still have to register for a tax number, and you still have to file annual returns, but the calculations are streamlined by flat rate taxing.

Personal Income Tax in Montenegro

When you are registered for personal income tax in Montenegro, you will pay a flat rate of 9% on your gross earnings in the country. This usually includes your international income if you receive an income from elsewhere, however it depends on what the tax agreement with your country is. If you earn more than the local average, your income tax will increase to 11% – which is still significantly lower than most parts of the world! 

Montenegro currently has tax treaties in place with 43 countries. Which means if you are a citizen of those countries and are already paying tax on your income in that country in that country, you will not be double taxed in Montenegro.

If you have income from a salaried position as well as self employment income, you are entitled to deduct 30% from those earnings to cover expenditure before calculating your taxes.

Corporate Income Tax in Montenegro

Like individuals’ corporations in Montenegro are taxed a 9% flat rate on their income up to 100,000 Euros. 

If your cooperation earns more than 100,000 euros in a year, but not more than 1.5 million euros, you will be taxed 12% on the portion of your income that is greater than 100,000 euros.

Finally, if your company earns more than 1.5 million euros in one year, you will be taxed a flat rate of 177,000 euros, plus 15% on all profits over €1.5 million.

This is not quite as simple as the personal income tax system in Montenegro, but it’s still a lot simpler than the system in most other countries.

Tax Incentives for Companies

If you have just started a business in Montenegro and you are operating in the northern part of the country, you should know that there is a significant benefit available to new businesses. You will be exempt from corporate income tax for the first eight years of operation and up to 200,000 euros in income per year.

So, if you are looking to move to Montenegro to take advantage of the tax system for business purposes, it’s worth planning to start your business in this area if you can.

Real Estate Taxes in Montenegro

Like most countries there are variety of real estate taxes that you will pay if you own property in Montenegro. 

Firstly, there’s the property tax itself which depends on the region your properties located in a can vary between 0.5% and 1% in most areas. There is also a property transfer tax of 3% when you sell a property. 

Rental income from property that you own is taxed as ordinary income which means a flat rate of 9%.

Finally capital gains on property sales and other types of capital gains are also taxed at a flat rate of 9%.

VAT in Montenegro

VAT or value added tax in Montenegro is charged on most goods and services and is usually included in any bill or quotation you receive. 

At just 7%, the VAT in Montenegro is among the lowest in Europe and the world.

If you buy a new property in Montenegro that has never been sold before, you will also pay VAT on the sale. 

Indirect taxes

If you work and earn a salary in Montenegro, there are also some additional direct taxes that the government levies to pay for services that residents and citizens enjoy. these include:

• Pension and disability insurance
• Unemployment insurance
• Health insurance

Companies and individuals both contribute to these funds, and currently the percentage is paid for each are:

• 5.5% corporate and 15% individual for pension and disability
• 0.5% each for unemployment insurance 
• 2.3% corporate and 8.5% health 

These deductions are made when salaries and wages are calculated and are automatically remitted to the government. everyone who pays into these funds however is entitled to claim from them when they are necessary. so, these taxes are essentially a means to fund the social safety net.

Double Taxation Treaty

As mentioned before Montenegro currently has tax treaties with 43 countries. Which means that if you are citizen of that country and you pay tax on your income that is earned there you will not be taxed on that income in Montenegro.

How do I become a tax resident in Montenegro?

To become a tax resident in Montenegro, you first need to become a resident of the country by completing the immigration process. once you have resided in the country for six months or more, you will be considered a resident for tax purposes.

FAQ

How do you immigrate to Montenegro?

There are several ways that you might choose to immigrate to Montenegro if you are interested in taking advantage of the tax system in Montenegro. one of the easiest ways to do this if you have the financial means, is through the immigration by investment program.v this allows you to bypass the need for a job or some of the other requirements of regular immigration, and instead invest in a government approved program.

Will the tax system in Montenegro stay this way?

There is some debate about whether the tax system in Montenegro will stay as favorable for the long term. Since the country is already in the process of becoming part of the EU, there is some speculation that the tax rates in Montenegro might change when that happens. however, it is still thought that even if they do change, they will remain more favorable to attract more high net worth individuals as immigrants.

Where is Montenegro?

Montenegro is located in the Balkan region of Eastern Europe. It shares borders with Serbia, Bosnia and Herzegovina, Kosovo, Croatia, and Albania, and is directly opposite the eastern coast of Italy, across the Adriatic Sea. 

Is it safe to live in Montenegro?

Yes. While there is some crime in the largest cities in Montenegro, it is considered to be a relatively safe country by European standards.

What is the cost of living in Montenegro like?

Montenegro is generally considered to be a very affordable place to live. in fact, the cost of living in Montenegro is well over 40% less than it is in the United States. This Combined with the climate and lifestyle in Montenegro has made it a popular retirement destination as well. 

Contact Us

Smart Citizenship has been helping individuals to immigrate for many years. We specialize in immigration by investment and golden visa programs and have helped many people to make Montenegro their new home.

if you are interested in moving to Montenegro, or just want to find out more about the Montenegro tax system and how it might benefit you, we are happy to talk. Contact us with your questions or to find out how we can help you in your immigration process.