Tax system in Montenegro

The tax system in Montenegro consists of:

Corporate Income Tax:

Tax on taxable profits with progressive rates based on profit brackets

9% on profits up to €100,000
12% + €9,000 on profits from €100,000.01 to €1,500,000
15% + €177,000 on profits over €1,500,000

Real Estate Tax - Paid yearly:

Municipality-dependent rates, tax rate 0,5 - 0,6% from the property price

Tax rate for commercial spaces and hotel apartments is 0,4%

Real Estate Transfer Tax - One time payment:

3% for properties up to €150,000
€4,500 + 5% on amount exceeding €150,000
for properties up to €500,000 - €22,000 + 6% on amount exceeding €500,000

For new development projects, when a property is purchased directly from the developer, real estate transfer tax is not payable.

Capital Gain Tax

In Montenegro, capital gains tax on property sales applies when an individual sells real estate and realises a profit. The tax is generally calculated on the difference between the sale price and the purchase price of the property.

Key points about capital gains tax on properties in Montenegro:

The standard capital gains tax rate is 15% for individuals on the net gain from the sale. For companies, capital gain tax is calculated as Corporate Income tax.
If the property is sold within two years of purchase, the capital gain is subject to taxation. Properties held for more than two years before sale are typically exempt from capital gains tax.
Certain exemptions may apply, such as for primary residences or inherited properties, depending on specific conditions.
Sellers are responsible for declaring the gain and paying the tax to the Montenegrin tax authorities.

This tax framework encourages longer-term property ownership and ensures taxation on short-term speculative sales.

	Individuals	Companies
Tax Rate on Capital Gains	15% on net gain if sold within 2 years	Taxed as part of corporate income at standard corporate tax rate (9%, 12% or 15% depending on the value)
Holding Period Exemption	Exempt if held for more than 2 years	No exemption based on holding period; gains are part of taxable profit regardless of holding period
Tax Base	Difference between sale price and purchase price	Profit from sale included in overall company income
Declaration & Payment	Declared and paid by individual seller	Included in company’s annual corporate tax return and paid accordingly

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Rental Income Tax

Rental income in Montenegro is subject to taxation for both individuals and companies, but the rules and rates differ depending on the taxpayer type.

Here are the key details:

Aspect	Individuals	Companies
Tax Rate on Rental Income	Flat rate of 15% on gross rental income	Taxed as part of corporate income at 9%, 12% or 15% corporate tax rate on net profit (income minus expenses)
Tax Base	Gross rental income (no deduction for expenses)	Net rental income (income minus allowable expenses)
Tax Declaration	Individuals must declare rental income annually	Rental income included in company’s annual tax return

Additional notes:

Individuals renting out property pay 9% tax on the total rental amount received without deducting expenses.
Companies can deduct related expenses from rental income before applying the 9% corporate tax.
Rental income must be reported to the Montenegrin tax authorities annually.
Failure to declare rental income can lead to penalties.

This system encourages transparency and ensures rental income is taxed fairly for both individuals and businesses.

Personal Income Tax Tax on gross monthly wages, progressive based on income level

0% applicable on gross monthly wages up to €700
9% applicable on gross monthly wages up to €1000
15% applicable on gross monthly wages above €1000

Value Added Tax (VAT)

Two positive rates of value added tax (VAT) are applied:
1. standard rate of 21%
2. the reduced rate of 7%, and the zero rate