Parliament of Montenegro adopted a series of changes to tax regulations that were published in the Official Gazette of Montenegro no. 028/23 of March 10, 2023.

This is an overview of the most significant changes and the beginning of their implementation.

Law on Real Estate Sales Tax

The progressive taxation of real estate transactions comes into play, as follows:

  • Real estate transactions up to €150,000 are taxed at a rate of 3%,
  • The turnover of real estate in the range of € 150.00 to € 500.000 is taxed at a rate of 5%,f 3%,
  • Real estate turnover above €500,000 is taxed at a rate of 6%.

These changes will apply from January 1, 2024.

Corporate Income Tax Law 

Payments made on the basis of a loan, i.e. loans made by the taxpayer to natural persons who do not have the status of a related party, up to the amount of € 5,000 per year, are exempt from tax.

A special withholding tax rate of 30% is introduced on income paid to a non-resident legal entity that is established or has a registered seat or has a seat of administration or a place of effective administration in a territory with tax sovereignty. The list of territories with tax sovereignty is published by the Ministry of Finance of Montenegro on its website. This provision does not apply to a non-resident person who has the status of resident in a country with which Montenegro has concluded an agreement on the avoidance of double taxation.

Furthermore, a person that is established or has a registered seat or has a seat of administration or a place of effective administration in the territory with tax sovereignty is considered a related person of the tax resident of the income payer.

Beneficiaries of incentive measures for the development of research and innovation in accordance with the law governing incentive measures for the development of research and innovation are exempted from paying corporate income tax.

A new provision is introduced which defines that transactions between a permanent business unit and a non-resident head office of that business unit are subject to transfer pricing documentation.

These changes apply from March 18, 2023.