I. Individuals
1.1 Personal Income Tax
Residents are subject to tax on their worldwide income. Non-residents are taxed on their Montenegrin-sourced income only. Income tax is assessed in the year during which the income is earned on a current-year basis.
1.1.1 Tax Rates
1.1.2 Taxable Incomes
1.1.3 Exempt Income
1.1.4 Deductible Expenses
1.1.5 Non Deductible Expenses
Generally, no deductions are allowable on aggregate income.
1.2 Social and Health Insurance Contributions
1.3 Submission of Tax Returns
The deadline for submission of the tax return is 30thApril of the following year (the tax year coincides with the calendar year). The tax should be paid by the same deadline.
Individuals who received no income otherthanemployment one and were working only with one employer during the tax year are not obliged to submit a tax return.
II. Corporate Taxation
2.1 Corporate Income Tax
Resident companies are subject to profit tax on their worldwide income, while non-resident companies are taxed only on theirincomes derived from sources in Montenegro. Capital gains, dividends, interests, and royalties are included in the income of companies and are taxed as part of corporate income tax.
2.1.1 Residency
Tax residency is established when a company has a permanent establishment, or the management and control is exercised in Montenegro.
2.1.2 Tax Rates
Montenegro applies a progressive tax system.
2.1.3 Taxable Incomes
2.1.4 Exempt Income
Thefollowingare exemptfrompaymentofcorporate income tax:
- Local and central government bodies;
- Public enterprises, tourism organizations, sports clubs, sports associations, art associations, and politicalparties;
- Non-governmental organizations;
- Entities that conduct only religious, humanitarian, charitable, scientific, or educational activities;
- Labor organizations and commercial chambers; and
- Dividends and other profit distributions arising from holding shares in resident legal entities are tax-exempt.
2.1.5 Deductible Expenses
All expenses incurred wholly and exclusively for the generation of income are deductible for tax purposes if supported by relevant documents such as tax invoices, foreign invoices, receipts issued by state entities or other documents compiled and issued according to the Ministry of Finance Directives.
Deductible expenses include, among others:
2.1.6 Non-deductible Expenses
Expenses that were not wholly and exclusively incurred for the generation of income, or expenses that have not been documented properly are not deductible for tax purposes.
Non-deductible expenses include:
2.2 Withholding Taxes
The withholding tax rate is 15%.
All residents, including companies, sole entrepreneurs, central and local governmental bodies, non-profit organizations, and any other legal entity registered in Montenegro are obliged to withhold tax from the following payments generated in Montenegro:
The payer is obliged to withhold the tax and pay it to the account of the Tax Authorities on behalf of the beneficiary of the payment.
The domestic withholding tax rate (15%) may be reduced when a double tax treaty exists with more favorable rates.
Double tax treaty network in force for 2023
Foreign companies whose headquarters are in "territories with tax sovereignty withholding tax of 30 % instead of 15 %.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
