The tax system of Montenegro is not distinguished by particular complexity and is largely identical to the taxation systems of other European countries. The country's authorities have recently been making great efforts to raise the prestige of Montenegro in the eyes of foreign investors. For example, one of the areas of their work is to reduce the tax burden and introduce specific tax incentives. Also, a special call center was recently created at the Tax Inspectorate of Montenegro, where anyone can ask any questions and get a qualified answer on the taxation system.

Let's briefly consider the main taxes in Montenegro with examples:

— VAT (or value added tax). This tax in Montenegro is levied on all products, materials or services produced in the country for which payment was received, as well as products imported from other countries. The main tax rate for the current day is 21% (the last increase occurred in January 2018 from the previously established 19%).

For certain categories of goods, food, medicines, textbooks, a reduced VAT rate of 7% is provided. The authorities are constantly fighting companies and entrepreneurs who do not want to advertise their own income, and according to the law, if a client has not received a fiscal receipt for a purchase made or a service provided, he can immediately call the tax office and report this violation. As a result, everywhere at the service points at the cash desks there are information leaflets stating that "the buyer is obliged to take a cash receipt."

— Income tax: all citizens of Montenegro and stateless persons who make a profit in the country are burdened with this tax. According to the law, any profit or increase in own funds is classified as sources of income, based on the difference between profit and expenses for the implementation of activities and is calculated as follows:

  • 0% from amounts up to 785 euros if the profit is less than 785 euros;
  • 15% over EUR 785 with profits between EUR 785 and EUR 2,615;
  • EUR 274 + 19% over EUR 2,615 on profits between EUR 2,615 and EUR 4,577;
  • 647 euros + 23% of more than 4,577 euros from profits above 4,577 euros.

Only diplomatic staff, politicians, UN experts are exempted from paying income tax in Montenegro. VAT is also exempt from activities related to the restoration of the economy from natural disasters, charity, student assistance, humanitarian aid, income from gifts and inheritance, and some others. Lottery winnings and gambling income were also ignored by the tax authorities.

– Legal entities are charged more income tax. The income tax rate in Montenegro is 9% (which is considered one of the lowest rates in Europe), for dividends - 15%, for interest income - 5%. This tax is paid by legal entities that produce goods or provide services on the territory of the country, extract the natural resources of the state, and provide risk insurance. Tax returns must be filed by February 28th.

The taxation system of Montenegro provides tax incentives for those legal entities that conduct their own activities in developing regions, but only during the first three years of their work.

— Real estate transaction tax. This tax covers any actions with real estate related to the transfer of ownership of it, such as sale, acquisition, exchange, donation, inheritance, and the like. Real estate in the law under consideration refers to both plots of land and any type of building on it, regardless of their purpose.

The tax rate is 3% of the market price of the property (which is again considered one of the lowest in Europe), and the buyer of the property is considered to be the payer. Some categories of persons and organizations are exempt from paying this tax (such as diplomatic consulates, humanitarian organizations, and others).

- Annually paid property tax. This tax is paid by both legal entities and individuals, owners of real estate. The tax rate varies from 0.1% to 1% depending on many factors, such as the purpose of the premises, distance from the sea, quality of the premises, etc. When paying property tax, local residents are in a more privileged position than foreigners. For them, the tax rate starts from 0.20 euros per square, while foreigners already pay from 0.50 euros for the same area!

In addition to the real estate tax, foreigners (as well as local residents for whom the purchased housing is not the only one) pay an additional tourist tax. It covers all real estate located on the Adriatic coast.

In cases where Montenegrin real estate is purchased for rent, the tourist tax is 7% and is equal to the income tax. The penalty for non-payment or late payment of taxes for legal entities ranges from 20 to 200 minimum salaries (at the time of this writing - February 2018 - the minimum salary is 193 euros), and for individuals - from 2 to 20 minimum wages.