Tax Minimization in Montenegro

Tax Minimization in Montenegro

Updated on Monday 27th February 2023

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Tax Minimization in MontenegroVarious tax minimization strategies are available to individuals and Montenegrin companies alike. Tax minimization in Montenegro is used as a financial planning solution for reducing certain taxes. The Montenegrin taxation system allows a series of deductions which help lower the taxes levied on income. Our lawyers in Montenegro can provide a wide range of tax minimization solutions to their interested clients.

Tax deductions in Montenegro

The available tax minimization measures are one of the reasons that drive businessmen to invest in Montenegro. The most important tax deductions in Montenegro are:

•    A reduced VAT of 7% applies to basic foodstuff, certain medicines, furniture for hotels, books and daily press;
•    No VAT is paid for export products, free trade agreements, bank and insurance products;
•    Several tax deductions are granted to investors who create jobs with open-ended contracts;
•   There are no taxes withheld for profits reinvested by a company in shares and bonds within 12 months since these profits were generated;
•    No special tax regime for expatriates;
•   Corporate tax exemption for Montenegrin companies involved in commercial activities in less developed areas. This exemption is applied for a period of three years;
•    Offset of losses – a loss may be offset up to 5 years forward;
•    Deduction at source for payments made to foreign residents is subject to the Double Taxation Prevention Treaty;
•    Acquisition costs, related expenses and improvement costs are deducted from taxable capital gains.

Our attorneys in Montenegro can give you more details about the tax deductions and reimbursement methods provided within the commercial legislation. Montenegro offers a safe way of life supported by European-style infrastructure. The fact that Montenegro is on track to join the EU encourages many foreigners to apply for citizenship here. Montenegro has one of the world's lowest personal income tax rates, ranging between 9 and 11%. Obtaining Montenegrin citizenship will clarify your tax status and resolve tricky cases of double taxation.

Tax minimization measures for Montenegrin companies

The local authorities in Montenegro adopted several amendments to the Corporate Income Tax Law and the Value Added Tax Law. These amendments are aimed at allowing Montenegrin companies to minimize their taxes. According to the provisions of this legislation, salaries, service payments at retirement, redundancy payments and payments of the other benefits at termination of employment are recognized as tax deductible expense of Montenegrin taxpayers, in the tax period in which the payment was executed. The following expenses made by a company are deductible up to the amount of 3.5% of the total income: healthcare, education, environmental and humanitarian purposes, protection and promotion of human and minority rights, assistance to the elderly, promotion of agriculture and rural development, consumer protection and fight against corruption and organized crime.

If you need more information about the available tax minimization measures within the amended business legislation, feel free to contact our law firm in Montenegro.