As far as personal taxation is concerned, it can be seen that personal income tax in Montenegro is contingent on the residency status of a given individual. As far as residents are concerned, there are taxed on their worldwide income from any given source.
On the other hand, as far as non-residents are concerned, they are taxed on income that is related to the Permanent Establishment status of the given individual. Non-residents are taxed on the basis of the income resulting from Permanent Establishment in Montenegro. In other words, they are supposed to pay taxes on the income earned from within Montenegro. When calculating the taxable income, it is also helpful to include royalties, interest, as well as rental income from immovable property in Montenegro.
The tax year in Montenegro spreads across a calendar year. All taxpayers are supposed to file their annual tax returns at the end of April.
Personal Income Taxation Rate in Montenegro
Personal Income Tax is levied at a flat rate in Montenegro. The currently prevalent rate of taxation is set at 11%. It previously used to be 9%, but it was temporarily increased in 2016. However, this change has still not been reverted.
The rate of 11% is levied on salaried individuals, as well as individuals that are earning a property-related income. Interest income that is earned by non-residents, however, is taxed at a rate of 5%.
In addition to personal income tax, the tax regime in Montenegro also includes a local surtax, which is supposed to be paid to the respective local government (or municipality). In most municipalities, the surtax is set at a percentage of 13%. However, in 2 states (namely, Podgorica and Cetinje), the rate differs from 13%, and tax in these municipalities is levied at a rate of 15%.
A consumption tax is also levied in the form of Value Added Tax (VAT). Taxable supplied, in line of the consumption tax are levied at a rate of 21%. This is in accordance with the EU guidelines. However, there is a reduced VAT that is applicable on necessary supplies (mainly, food staples). For such supplies, the VAT is set at a rate of 7%. Some categories of goods and services are also zero rated. This implies that a 0% VAT is levied across those products. Examples of these zero rated products include exported goods and services, as well as petroleum and gasoline supplies.
Corporate Income Tax in Montenegro
All the corporations in Montenegro are subject to a corporate income tax of 9%.
However, here too, there is a difference between resident and non-resident corporations. As far as resident taxpayers are concerned, they are taxed on their worldwide profit. On the contrary, non-resident corporations in Montenegro have a tax incidence on the income that is sourced from Montenegro.
It must also be noted that non-resident companies in Montenegro are also supposed to bear a Withholding Tax (WHT) on income that is sourced in Montenegro.
Other than that, there are no local corporate taxes that are spread across municipalities.
Other Corporate Taxes in Montenegro
Other than consumption tax in the form of VAT (Value Added Tax), there are some other corporate taxes too that are levied on corporations in Montenegro. These taxes are as follows:
- Customs Duty: As far as exports are concerned, there are no custom duties levied on exports. However, there are certain custom duties that are levied on imported goods and services in Montenegro. These duties are mostly Ad valorem, and range between 0% and 30%. Additionally, there are also specific duties that range between EUR 0.04 (on a per kg basis) to EUR 1.
- Excise Duties: There are excise duties that are imposed on certain luxury items. Examples of goods on which excise duty is implemented includes alcohol, tobacco, mineral oils, as well as liquid for e-cigarettes.
Additionally, there is also a tax that is imposed on coffee imported in Montenegro. The tax rate, however, varies between EUR 0.8 (on a per kg basis) to EUR 2.5 (on a per kg basis).
- Property Tax: Property Tax is also levied on an annual basis in Montenegro. It is applied at a rate ranging from 0.25% to 1% depending on the market value of assets.
- Property Transfer Taxes: Additionally, there is a transfer tax of 3% that is levied in the case where there is a change in acquisition of ownership rights of a given immovable property.
- Payroll Tax: Employment income over the course of the financial year is also taxed at a rate of 9%. This is a withholding tax that is applied at a flat rate of 9%.
- Social Security Contributions: In addition to payroll tax, employers are also supposed to pay tax in lieu of social security contributions. The rates that are borne by the employer in line of social security contributions are as follows:
- Pension and Disability Insurance contribution: 5.5% of the gross salary
- Health Insurance: 2.3% of the gross salary
- Unemployment Insurance: 0.5% of the gross salary
On the contrary, the contributions made by the employees with regard to social security contributions are as follows:
- Pension and Disability Insurance: 15% of the gross salary
- Health Insurance: 8% of the gross salary
- Unemployment Insurance: 0.5% of the gross salary
- Environmental Charges: All the corporations in Montenegro are also supposed to bear environmental charges on the following parameters:
- Usage of electric equipment with power greater than 1 MW
- Importing any substance that has a detrimental impact on the atmosphere
- Production, or dumping of dangerous (and hazardous) waste