The Real Estate Transfer Tax in Montenegro

Real estate transfer taxes are one-time fees levied by the Montenegrin tax administration on the transfer of ownership of virtually all property types, including condos, houses, commercial real estate, and urbanized & agricultural land. In its nature as an ‘ad valorem’ tax, the amount that is due to the Government is based on the property’s current market value or municipal assessment.

Property transfer taxes even apply in cases where:

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two owners exchange property
property is inherited
real estate is received as a gift
property is sold or transferred to a corporation
property is transferred from a corporation to its shareholder(s)

Info: Real Estate Transfer Taxes are not owed upon the transfer of new construction homes sold in the primary market.

Tax Rates

The tax rate applicable to the transfer of economic interest in real estate ranges from 3% to 6%. Employing a marginal tax system, different rates are applied to different levels of transaction value. As the property value rises, each additional bracket (or ‘layer’) is taxed at a higher tax rate.

Parties involved in a conveyance transaction of 100.000,00€ will pay 3.000,00€ in real estate transfer taxes, whereas the transfer of a property valued at 300.000,00€ will incur a total tax of 12.000,00€: 3% on the first 150k (4.500,00€), and then 5% (7.500,00€) on the remaining amount. Likewise, some obtaining economic interest in immovable property assessed at 700.000,00€, will have to pay 34.000,00€ in real estate transfer taxes:

3% on the first 150k,
5% on 350k,
6% on the last 200k

Who Pays the Tax?

In Montenegro, buyers usually pay the real estate transfer tax rather than the seller. However, buyers can negotiate for sellers to cover this expense, which a seller may agree to in a market environment dictated by an abundance of housing supply, to give themseves the advantage over other sellers. The tax is paid upon the transfer of the property and can be thought of as part of the total closing costs beside notary’s, lawyer’s and real estate agent’s fees.

KEY TAKEAWAYS

Real Estate Transfer Taxes are paid upon change of ownership of land, residential, and commercial property
The marginal tax rate (3% – 6%) is imposed on the property’s market or assessed value
The responsibility for paying the real estate transfer tax falls on the buyer

How they differ from other Property Taxes

Real Estate transfer taxes should not be confused with property taxes, gift taxes, and estate taxes, although it may be easy to confound them:

Property taxes: These annual taxes are also levied on real estate as a percentage of market value of the property as assessed by the municipality where it is located.
Estate taxes: This tax is levied on property and other assets of a deceased party, allowing them to be transferred to their heirs.
Gift taxes: Gift taxes are imposed on the transfer of assets by one individual to another without repayment, and are mainly levied on the transfer of real estate in the same amount as the real estate transfer taxes.

Exeptions

Some property transfers are exempt from the real estate transfer tax in Montenegro, including transfers among heirs of the first order of succession (spouses and children), to the State of Montenegro, to nonprofit organizations but only if the property is used to foster their charitable mission, between ex-spouses after divorce, among heirs of the second order of succession under certain circumstances.

File and Pay the Property Transfer Tax

As a buyer, you must submit the real estate transfer tax return (alongside with the purchase or transfer agreement) to the local branch of Montenegro’s tax office where the property is located, and pay all applicable taxes no later than fifteen days after the delivery of the property deed. If you fail to pay the tax by the specified date shown on the return, interest and fines of up to 10,000€ must be paid from the due date to the date paid.