Taxation in Montenegro
If you open a company in Montenegro you will surely need to know what tax regulations in Montenegro apply to your business. Depending on the line and the type of your enterprise, you might need to have several employees. Apart from the corporate tax that will be charged on your company, there are also social security contributions that you must pay to the Montenegrin authorities, for your employees.
Both residents and non-residents must follow the same taxation rules and rates. The foreign investors who open a company in Montenegro are due to pay the corporate tax at the rate of 9%, which is deduced from the income they obtain in this country. Although the funds gathered from the corporate tax are an important source of money for the government, the corporate tax has been lowered by law, from a maximum of 20% in the past years to the actual rate of 9%, in order to encourage foreign investment in the country.
The withholding tax payed by non-residents for dividends, interests, royalties and services, can be deduced according to the double taxations treaties signed by Montenegro with other countries. Montenegro has signed bilateral agreements regarding the avoidance of the double tax treaties with
Albania, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Iran, Italy, Korea, Kuwait, Latonia, Macedonia, Malaysia, Moldavia, Holland, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine and United Kingdom
Besides these treaties, many other draft agreements are still in discussion. The treaties are signed by the Ministry of Finance’s representative and ratified and after that they can enter in force.
VAT in Montenegro
When you open a Montenegro company and you provide goods and services, the business will be subject to value added tax. VAT in Montenegro is imposed at a rate of 19%, 7%, and 0%. 19 percent is the general rate for the sale of goods and services while 7% is the reduced rate imposed on specific products. The 0% VAT rate is also imposed on specific transactions only. The amount that is taxed is the value paid for the goods or services sold. Value added tax in Montenegro is covered by the LAW on Value Added Tax which was implemented since 2003.
VAT registration in Montenegro
If you have opened a company in Montenegro, you should know that there is either a voluntary or mandatory registration for value added tax. Companies that have not realized a profit of more than 18,000 euros in one year may voluntarily register for VAT in Montenegro. Those businesses that yield an income of more than 18,000 euros in one year are required to register for VAT purposes. Companies can file their application for VAT registration in Montenegro at the Ministry of Finance which regulates the form and contents of the application.
Payment of VAT in Montenegro
Value added tax in Montenegro covers the first of the month up to the last day of the same month. If you open a company in Montenegro, you have to account and pay VAT during the said period. Payment has to be made on the 15th day of the month following the taxable period and the taxpayer has to file a VAT return for the correct assessment of liability.
Goods and services covered by Montenegro value added tax
The standard rate of VAT in Montenegro is 19%. There are certain goods and services that are covered by either 7% or 0%. Here are some of those that are covered by 7%:
- Basic goods that are for human consumption;
- Teaching materials;
- Public transportation of passengers and their baggage;
- Funeral services.
Those covered by 0% VAT are:
- Goods exported by the seller or another person on his behalf from Montenegro;
- Goods exported from the country by a purchaser who has not engaged in company formation in Montenegro;
- Products used for international air and maritime traffic;
- Fuel and other important goods used by military vessels departing from Montenegro;
- Goods and services covered by treaties.
You can know more about the VAT in Montenegro by contacting us. We can also assist you with the VAT registration process.
Dividend Tax in Montenegro
Any company registered in Montenegro, managed and controlled there is considered to be resident and is subject to taxation. The flat corporate tax for a Montenegrin company is 9%, one of the lowest rates in Europe. The dividend tax in Montenegro is 9%, whether is paid to residents or non-residents. Taxation of dividends may be subject to tax treaties that stipulate reduced taxation. Our company formation specialists in Montenegro can help you comply with tax system in this country.
Tax treatment of dividends in Montenegro
Dividends paid to legal entities are considered part of their income and are taxed in accordance with the Corporate Income Tax Law (CIT), at a 9% rate. Dividends are considered personal income when shareholders are individuals and taxation is regulated by Personal Income Tax Law (PIT). The same 9% tax rate is applied in this case. Businessmen who want to open a company in Montenegro must know that same legal treatment is applied to non-resident and local entities.
Dividend tax in Montenegro and double tax treaty provisions
If you want to open a company in Montenegro you have to pay taxes. The application of a double tax treaty in Montenegro may reduce or even eliminate the dividend tax rate of 9%. Depending on the provisions of a double tax treaty, the dividend tax rate can be reduced to 5% or completely eliminated. A non-resident company is eligible for the beneficial rates prescribed by the treaty if it proves tax residency of a relevant treaty country and ownership over the income.
The tax residency certificate is the document that qualifies a non-resident company for a preferential tax rate according to a double tax treaty. This certificate must be filled out and stamped by the relevant authorities of its country of residence. The Republic of Montenegro declared its independency in June 2006. All treaties which were applicable in Serbia and Montenegro State Union continue to be honored by the Montenegrin authorities.
If you want to benefit from the double taxation agreements concluded by this country, feel free to contact our Montenegro company formation experts.
Other types of taxes in Montenegro
In Montenegro, the income tax is applied for earnings which result from salaries or self-employment as well as from real estate renting, or capital gains, such as those obtained from dividends and interests.
As provided by the Montenegro tax regulations, the social security system must receive from both employer and employee a contribution which is 67%. The social security retains this money in order to cover, pension, health and unemployment security, unions and tax on netto salari.
Our experts in company formation in Montenegro can keep you updated on your obligations regarding the taxation system in this country. Don’t hesitate to contact our firm in order to easily resolve the taxation issues for your company in Montenegro.