Tax system of Montenegro

From January 1, 2022, progressive taxation of wages and income of entrepreneurs was introduced. For other types of income, a proportional tax rate of 15% is introduced. Monthly wages are taxed at the following rates: wages up to 700 EUR are not taxed; wages from 701 to 1,000 EUR are taxed at a rate of 9%; Salary from 1,001 EUR is taxed at a rate of 15%. Monthly income received by entrepreneurs is taxed in the following order: from 8,400.01 to 12,000 EUR is taxed at a rate of 9%; from 12,000.01 EUR is taxed at 15%.

Local income tax Local income tax exists in addition to personal income tax (NDFL) and is paid to the municipality of the taxpayer's place of residence. An income tax of 13% applies in all municipalities, with the exception of Podgorica and Cetinje, where the rate is 15%. The local income tax base is the amount of accrued income tax (NDFL).

Companies operating in Montenegro are subject to progressive corporate income tax. The applicable tax rate depends on the taxpayers' realized profits and ranges from 9% to 15%. The progressive tax rates are as follows: for profits up to 100,000 EUR, the tax rate is 9%; on profits from 100,000 EUR to 1,500,000 EUR, tax is paid in the amount of 9,000 EUR plus 12% on profits over 100,000 EUR; on profits over 1,500,000 EUR, tax is paid in the amount of 177,000 EUR plus 15% on profits over 1,500,000 EUR. Resident taxpayers are subject to worldwide income tax. Non-resident taxpayers are taxed on their income derived from sources in Montenegro or on income attributable to their permanent establishment (PE) in Montenegro. Capital gains are included in taxable income and are taxed at a rate of 9% for both individuals and legal entities.

The basic principles of Montenegrin VAT are in line with the guidelines of the Sixth Directive of the European Union (EU). Taxable supplies are subject to VAT at a general rate of 21%. However, some supplies are taxed at a reduced rate of 7% (for example, bread, milk, books, medicines, computers) and at a rate of 0% (for example, the export of goods, the supply of gasoline for ships in international traffic). VAT registration in Montenegro can be either voluntary or mandatory. Voluntary VAT registration is possible for taxpayers whose turnover does not exceed EUR 30,000 over the last 12 months. Once registered, a company cannot apply for deregistration for at least 3 years. VAT registration is mandatory for a business whose turnover exceeds the threshold of EUR 30,000 in any 12-month period.