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What’s the Income Tax System in Montenegro? Tax Types and Tax Rates in Montenegro

By Kach Umandap July 21st, 2020 Posted in Europe Travel Blog, Travel Blog, Travel Guides No comments

If you are planning to relocate and own a business in another country or state, you should know the tax systems. Each country has its own taxation rules; some are more competitive than the other like no income taxes. If you want to migrate to Montenegro and open a company, learn here Tax Types and Tax Rates in Montenegro. But if you plan to live here to retire then you only need to pay for property tax without paying any income taxes.

What's the Income Tax System in Montenegro? Tax Types and Tax Rates in Montenegro
Photo by Olga DeLawrence on Unsplash

There are three things you can’t avoid; Death, Change, and Taxes. Surely, taxes are integral to a nation as they get revenue there and budget for government activities and projects. If you are living in Montenegro, then you can’t avoid it. How much do you pay there? Read here!

Immigrate to Montenegro

1. Personal Income Tax

The personal Income tax rate is about 9% and 11%. For Income above EUR 751 per month, 9% is used while if it’s above EUR 751 per year, it’s 11%. However, for any additional income, only 9% is used.

Personal Income Includes:

  • Salaries or Bonuses
  • Income from Business
  • Real Estate Income
  • Capital Gains Income

Allowances for travel, cars, seminars are usually are generally tax-exempt.

Please note that Montenegro Citizens are taxed on their worldwide income (e.g., if they are working out of the country for a few months, their income abroad is also subject to income tax unless there are double taxation treaties.) However, non-residents and non-citizens only pay taxes earned in Montenegro. You should consider this, especially when changing your citizenship.

Aside from your individual income tax, you’ll pay a surtax on Income tax. If the income tax is paid to nationally, this one is for the municipality. It’s usually 13%, but for Podgorica and Cetinje, the surtax is 15%.

Unlike some countries, there are no joint income returns for married couples in Montenegro. You file it separately. There are also no deductions or credits on PIT.

2. Corporate Income Tax Rate

As for corporations, there is a flat rate of 9% on their income tax.

That’s why this is usually the route for most Expats; this is also what I am currently using. If you want to have a company in Montenegro, you can read this article on How to Start a Company in Montenegro. With your own company, you hire yourself as an Executive Director and get a residency visa.

Resident companies (those incorporated in Montenegro or management is here) are taxed on their worldwide income. For non-resident or branches, taxes are on their earnings in the country.

Please also note that if you are established in the undeveloped Northern part of Montenegro, you get a tax holiday! It’s usually for the first 8 years covering about EURO 200,000 of your income.

3. Real Estate Taxes

In Montenegro, you will pay about 0.25% to 1% Annual Property Tax. The burden of payment shall be the user of the property and not the owner. Market value is used in the computation. The rate is a bit lower than in other parts of Europe, so you’re lucky!

4. Capital Gains Tax

Capital Gains Tax is a levy on the profit you get on selling certain assets like real estate and stocks. The tax rate in Montenegro for CGT is 9%.

5. Withholding Tax

For withholding tax on dividends, interests, and royalties – 9% is paid. For non-residents individuals in Montenegro, only 5% is withheld for interests.

6. Value Added Tax

One of the most common tax types and tax rates in Montenegro is the VAT. It’s usually added tax in most goods and services; the standard rate is 21%. However, there is also a reduced rate for selected products for 7% and zero-rate for exports and other supplies.

Double Taxation Treaties

Montenegro has tax treaties with many countries to prevent double taxation. This occurs when the same income is taxed twice in different countries. If you have a Montenegrin Company and have income in another country, sometimes you would pay corporate income tax on the country you are operating and also in Montenegro. Double tax treaties avoid that and it will make you exempt in one state. So, you can opt to pay taxes in Montenegro where the income tax is way lower than in your home country.

As of writing, there are 42 tax treaties on income and property signed by the government of Montenegro. Thirty-six are effective, while 6 are pending.

The following are in force as per the website of Government of Montenegro:

What's the Income Tax System in Montenegro? Tax Types and Tax Rates in Montenegro

What's the Income Tax System in Montenegro? Tax Types and Tax Rates in Montenegro
Photo by Kelly Sikkema on Unsplash

I hope you have learned in this article the Tax Types and Tax Rates in Montenegro. It’s reasonably competitive, like most European Nations. It may not be a haven like Andorra, Bermuda, or Monaco, but it’s a bit affordable than most of Europe. It’s one of the reasons I moved here and if you are thinking of relocation, hit me up as I offer immigration and relocation services.

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Written by Kach Umandap

Founder of Two Monkeys Travel Group. Since 2013, Kach has visited all the 7 continents (including Antarctica) and 151 countries using her Philippines Passport. In 2016, she bought a sailboat and went on sailing adventures with her two cats - Captain Ahab & Little Zissou in the Caribbean for 2 years. She now lives in Herceg Novi, Montenegro where she's enjoying her expat life and living on a gorgeous Stonehouse. She writes about her experiences traveling as a Filipina traveler with a PHL Passport. Also tips on backpacking trips, luxury hotel experiences, product reviews, sailing & adventure travel.