Taxation/salaries

Taxation/salaries

Working in Europe | Taxation/salaries | Montenegro

Ministry of Finance and Social Welfare of Montenegro, Department of Public Revenues

The Department of Public Revenues is an administrative unit whose basic duties are collection system, tax regulations, implementation of laws and other regulations. Department is one of the units of the Ministry of Finance and Social Welfare.

As of January 1st, 2022 Montenegro is enforcing new economic program „Europe Now/Evropa Sad“, which resultated in several major changes regarding the minial wage, taxation, and other economic ativities.

Tax system

Montenegrin tax system is compatible with tax systems of developed European countries, EU directives, countries in transition particularly countries from region, regarding types of taxes and regarding procedures of determining collection methods and audit procedure. Tax system is based on direct and indirect taxes.

Direct taxes are those taxes that tax payers pay individually; such are real estate taxes and personal income taxes.

Indirect taxes are those taxes that are calculated and collected by intermediaries; such are VAT, excise duty and import duty.

Every person who generates income in Montenegro is obligatory to pay taxes.

Tax period for which the income tax shall be calculated shall be a calendar year, with the exemption of cases when a business activity terminates or commences during the year.

The income tax shall be calculated upon the expiry of the calendar year or other period for tax assessment according to the tax base realized during that period.

A tax base for the income tax of a resident shall represent the taxable income of the taxpayer generated during the tax period, reduced by the amount of loss carried forward.

A tax base for the income tax of a non-resident shall represent the taxable income of the taxpayer generated during the tax period.

Montenegrin tax system comprises:

• personal income tax
• property tax
• income tax
• VAT
• excise duty
• sales tax on vehicles tax
• games of chance tax

Relevant bodies of local administration decide on tax rates, for consumption tax and local income tax (local surtax), which are not the same in all municipalities.

Tax payer who pays personal income tax is resident i.e. non-resident natural person who generates income.

Personal income is income that tax payer generates from employment.

• Taxation of individuals’ income in Montenegro is based on their residence status.
• Residents are subject to tax on their worldwide income from any source.
• Non-residents are taxed on income related to a fixed base/permanent establishment (PE) in Montenegro and royalties, interest, and rental income from immovable property in Montenegro.
• Income from employer is gross income, tax rate is calculated proportionally, incomes from and to personal incomes are calculated (from - employees income; to – employers charge).
• Income from self-employment is autonomous activity calculated by proportional rate. Property and property rights income tax is calculated proportionally, annual report is submitted to GPFL.
• Tax on Capital is calculated by proportional rate:
  • From 0 to 100,000 EUR - 9%;
  • From 100,000 do 1,500, 000 EUR -12%;
  • Over 1,500,000 EUR - 15%.
• Tax payers (old age and disability insurance, and health insurance) are: employees, persons who perform temporary and occasionally work, foreigners employed in Montenegro at foreign legal and natural persons, persons employed in international organizations and institutions, as well as foreigners employed at Montenegrin legal or natural persons. Tax base is calculated in accordance with the Law, i.e. collective agreement and employment contract.
• As of 1st January 2022, progressive taxation of salary and income earned by entrepreneurs is introduced. Proportional 15% tax rate is introduced to other type of income.
• Salary is taxed in the following manner:
  • Salaries up to EUR 700 (gross) are exempt from tax;
  • Salaries ranging from EUR 701 up to EUR 1,000 (gross) are subject to 9% tax;
  • Salaries from EUR 1001 (gross) are subject to 15% tax.

• Income earned by entrepreneurs is taxed in the following manner:
  • From EUR 8,400.01 to EUR 12,000 is subject to 9% tax;
  • From EUR 12,000.01 is subject to 15% tax.

Resident and non-resident persons practice the same rights and obligations.

Tax base is gross income, and this determines amount of income and not number of family members and if spouse is supported.

Local income tax for personal incomes is 15% for Podgorica and Cetinje, and 13% for Niksic.

More information on taxation in Montenegro: https://taxsummaries.pwc.com/montenegro/individual/taxes-on-personal-in…

Avoidance of double taxation

Avoidance of double taxation has greater importance than provisions of this Law. In tax calculations, after taxes are collected from income that non-resident legal persons generates, income payer applies provisions of the agreement on avoidance of double taxation, if non-resident proves that he/she is resident of country with which Montenegro has signed this agreement. Evidence of being a resident of country with which Montenegro has signed an agreement on avoidance of double taxation is proved with income payer with a certificate or other document verified by relevant body of residence country.

Agreements on avoidance of double taxation are kept at the Ministry of Foreign Affairs.