Capital Gains Tax in Montenegro

Capital gains taxes in Montenegro are levied when you sell (or dispose/partially dispose) an investment/capital asset for more than you initially paid for it. Contrary to popular belief, you will only be taxed on the gain and not on the total amount of money received. For example, if you bought a house for 200,000 Euros and sold it later for 250,000 Euros, you’ll be taxed on the gain of 50,000 Euros.

KEY TAKEAWAYS

Montenegro’s tax code does not differentiate between long-term and short-term capital gains
The capital gains tax rate is 15% and is levied on the profits made from the sale of real estate (including land, condominium buildings, and commercial property), stocks, bonds, and shares in private companies
Cryptocurrencies and other digital assets like NFTs are not yet regulated in Montenegro, the capital gains tax regime still applies
Capital gains are reported on your individual income tax return, due at April 30th each year
Capital Gain = Sales Price – Purchase Price
No capital gains taxes are due for unrealized investment gains from capital asset you own but haven’t liquidated yet
You have to pay capital gains tax on your share of the gain for jointly owned assets

Who Pays Capital Gains Tax?

Capital Gains Tax in Montenegro is payable by resident and non-resident individuals, sole proprietorships (Preduzetnik), and partners in partnerships (Ortacka Drustvo). Montenegrin Limited Liability Companies (D.O.O.) are, however, not subject to capital gains taxes. Instead, corporate income taxes are levied on the corporation’s asset sales.

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Capital Gains Tax Excemptions

Montenegrin lawmakers have introduced three capital gains tax exemptions, allowing taxpayers to benefit from tax relief on the sale of real estate, provided they meet the specific conditions and circumstances outlined in article 37 G of the Personal Income Tax Code.

Private Residence Relief: When you own real estate which also serves as your principal residence, no capital gains taxes are due when selling the property
Assets from a Family Member Relief: The transfer of real estate between spouses, civil partners, children, and parents are excempt from Capital Gains Tax
After Divorce/Death Relief: No Capital Gains Taxes are levied on real estate that is passed on death or divorce

Further exemptions

Other exemptions from Montenegro’s CGT include gains from:

Sports betting, casinos, lotteries, and other games of chance
Baby bonus schemes
Bonuses payable under Montenegro’s Social Assistance schemes
Payouts from life, home, and health insurance policies
Gifts and inheritances
Private motor cars and other vehicles
Collectibles

Reducing / Avoiding Capital Gains Tax on Real Estate

While you won’t be paying any Capital Gains Taxes when selling your primary residence, you can also legally reduce your tax burden by deducting the costs of improvements that you made to 2nd homes or other investment properties over time. In any case, your property’s cost basis is determined by the acquisition price, expenses and legal fees associated with the purchase, plus non-ecorative home improvement costs like thermal insulation and roof repairs.

Don’t lose sight of the fact that your financial losses from investments can be offset against profits in the same year they occur for individual taxpazyers and carried forward for up to five years for corporations. Some investors use strategies like tax-loss harvesting to reduce capital gains taxed owed by selling investments at a loss to cancel out profits made in the tax year.

Reporting and Paying Capital Gains Taxes in Montenegro

Since you won’t receive a bill over owed Capital Gains Taxes, it is your responsibility to report and pay them to Montenegro’s tax administration (Poreska Uprava). CGTs are reported by April 30th in the GPP-FL self assessment tax return. Partners in a business partnership (Ortacko Drustvo) must work out and file their share of each gain and loss separately. Here are some things to considere when reporting CGTs in Montenegro:

Determine the acquisition price of the asset plus any commissions or fees paid
Work out the sale price minus any deductible costs, fees, or commissions paid
Calculate CGTs owed by substracting the purchase price from the sales price
You need a tax identification number to file your individual tax return
When you sell or dispose of a capital asset, you must file a return by 31 April of the following year
Submit it yourself or consult with a tax pro. When you file with Adriacom, we will help you deduct all allowable expenses and tax reliefs, even if you have never been registered for tax purposes in Montenegro

Need help with navigating capital gains taxes?

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