Montenegro Personal Income Tax
As a Montenegrin (tax) resident, you are taxed on your worldwide income; nearly all income earned domestically or from foreign sources is subject to personal income tax. This tax is calculated across various income streams, including employment, self-employment, capital gains, rental income, royalties, and interest.
Employment Income
Personal income tax on gross employment income is progressive (ranging from 0% to 15%), meaning that higher incomes are taxed at higher rates. Because the system is marginal, only the portion of income within each bracket is taxed at that rate, rather than applying a single rate to your entire income.
Personal income taxation in Montenegro is based on the individual’s tax residency status. Non-residents are taxed only on income sourced from Montenegro, such as rental income from real estate or income earned through a permanent establishment in the country. The following marginal tax brackets apply to Montenegrin taxpayers based on their total gross monthly income:
The marginal tax rate is the rate at which your last Euro of income is taxed, while the initial portions of your income are taxed at lower rates. Here’s how that works for someone with a taxable income of 2,000€ per month:
- The portion of monthly income from 0€ to 700€ is exempt from personal income tax.
- The portion from 700.01€ to 1,000€ is taxed at 9%.
- The portion above 1,000.01€ is taxed at 15%.
Total monthly taxes owed: 0€ + 27€ + 150€ = 177.00€
As shown in the calculation above, the highest tax rate is not applied to your entire income; otherwise, you would have paid 300€ instead of 177€. Be mindful, however, that salary taxes are only one part of your overall tax burden in Montenegro, as social contributions are also levied on employment income.
Income From Self-Employment
Unlike income from limited liability companies (Društvo sa ograničenom odgovornošću or simply D.O.O.’s) and other corporations, income earned from sole traders and partnerships in Montenegro is taxed as ordinary personal income and reported on the individual’s GPP-FL tax return, using the same progressive tax brackets that apply to wages and salaries.
Income From Capital Gains, Rentals, Interest, and Royalties
If you receive income derived from the sale of capital assets (real estate or financial instruments), rental properties, taxable interest, or royalties, it is subject to personal income tax (PIT) at a flat rate of 15% in Montenegro. All such income must be reported on your annual personal income tax return (Obrazac GPP-FL).
Income Tax Allowances
In Montenegro, the standard Personal Allowance is 840€ per year, which is the amount of annual personal income you do not have to pay tax on. Other tax-free items include:
- Travel allowances provided by your employer
- Short-term per diem allowance for each travel day abroad
- Monthly field allowance (up to 100€ per month)
- Living-away-from-home allowance (up to 100€ per month)
- Bereavement allowance (up to 1,500€)
- Illness benefit for employees and their family members (up to 1,000€)
- Pension allowance (up to 1,000€)
- Education allowance (up to 200€ monthly)
- Vocational training allowance (all fees reimbursed)
- Years of service awards (10 years: 100€, 20 years: 200€, 30 years: 300€, 40 years: 400€)
- Food allowance for professional athletes (up to 300€ monthly)
Need help with navigating or filing personal income taxes?
Begin your filing today with adriacom. Quick, simple, and affordable.
– or –