The Rental Income Tax in Montenegro

If you own rental real estate in Montenegro, you should be aware of your tax obligations. All rental income sourced from property must be reported on either your individual tax return or as regular business income in your company’s financial statement, and by and large, the associated costs are allowed to be deducted from your gross rental income in the year they incur.

Private property owners report their rental income alongside other personal income (such as from sole trader activity, royalties, or capital gains) on the GPP-FL form when filing their individual tax return by April 30th every year. Rental income on investment properties held in a corporation is taxed at the entity level, together with other business income.

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If you own rental rental real estate outside Montenegro, you may still have to pay personal income tax on the earned rental income. If you are considered a tax resident of Montenegro, you will be taxed on your worldwide income, including leases and rentals abroad, without any deductions against that amount. What’s more, if you choose to sell your rental properties in Montenegro, you may have to pay Capital Gains Taxes as well.

What exactly is rental income?

Rental income is the sum of all payments you receive from your tenants for the short-or-long-term use of your rental property. As a private or corporate landlord, you are obliged to pay tax on rental income for all your properties. When receiving advance rent (any prepaid rent that has been prepaid more than one month in advance), you must report it on your tax return in the year you receive it.

For example, you sign a 5-year lease to rent your commercial property space out to a restaurant. You receive 20.000,00€ for the first lease year and another 20.000,00€ for the last year’s rent. In this case, you must report 40.000,00€ on your tax return in the first year for which you’re filing. At the same time, security deposits are regarded as advance rent.

If you share ownership of a rental property with another co-owner, you will have to report your share of the rental income from the property to the tax office. Should your tenant terminates his lease in exchange for a fee, the amount received is also considered rent in the year it is paid, and must also be included in your tax return for the period.

If you have concluded an agreement with the tenant, giving him the option to buy the property in the future, all payments received under such an agreement msut also be recorded as rental income in the period they occur. In case you receive services from your tenant instead of money as rent, the service must be included as a number reflecting its fair market value in your rental income.

For example, your tenant is an electrician and offers to lay new wirings, install new outlets and switches, and implement a new grounding system, instead of paying rent for the year. You must include the services received as rental income, as determined by ‘fair market value’, if you accept the offer.

Available Deductions/Expenses

Rental real estate owners are allowed to deduct certain rental expenses such as:

property taxes,
mortgage interest,
asset depreciation,
rental property insurance,
property management services,
home inspections,
marketing and advertising,
and the costs for operating and maintaining the property.

While all rental income in Montenegro is subject to taxation and there is no property allowance, all owners of real estate can deduct any reasonable expenses (as the ones listed above) incurred exclusively to earn rental income. If the property is owned by a limited liability company, all expenditures must be properly documented.

As a private landlord, you can either choose to document all rental expenses separately (through invoices, receipts, official vendor statements, credit card statements, etc) or opt for the simpler fixed allowable expenditures system, with the help of which you can get tax reliefs on your annual rental income, in the amount of:

30% on your total long-term rental income
50% on short-term rental income given that you are officially registered with Montenegro’s tourist tax system
70% excempted from taxation on short-term rental income when received via travel agent bookings

Calculating Rental Income Taxes (Private Landlords)

Managing rental real estate is obviously linked with some expenses, and under Montenegrin tax regulations, you are allowed to deduct some of them. Unlike corporate owners, private landlords can choose if they want to document their expenditures by means of verifiable and proper invoices and receipts, or, take advantage of the (simpler) lump sum tax allowance.

For long-term rentals, private property owners are eligable to simply take 30% off their total gross rental revenue as a tax-free lump sum allowance, i.e. only paying rental income tax on 70% of the rent received. Private landlords operating short-term rentals are allowed to even take 50% off their rental income earned from renting out holiday accommodations.

Rental Tax Calculator

To determine the net profit of your rental units, simply substract the taxes due from your total rental income. Quickly complete the fields for short-term and long-term rentals separately to find out how much taxes you owe on your rental income.

*Note: rental income sourced from foreign real estate needs to be declared separately as foreign income on the GPP-FL, Schedule F (‘Dohodak ostvaren izvan Crne Gore’).

Tax Return Filing

If you own a serviced apartment, holiday villa, or a regular long-term rental in Montenegro as a limited liability company or as an individual taxpayer, you must declare your rental income through either the GPP-FL or annual corporate tax return. Here are some things to consider:

Property owned by an Individual

Individual Income Tax Return: If the real estate owner is an individual, he or she must file a GPP-FL Tax Return listing the total rental income minus expenses and/or allowances.
Property Income: Receiving rental income from both short-term and long-term rentals in Montenegro is considered property income for tax purposes.
Rental Property Allowance: Individual property owners are allowed to deduct 30% of their rental revenue (for long-term rentals), 50% for short-term rentals in case that the tourist tax is paid, and up to 70% when rented via a travel agency. Property owners can also choose to expense against actual costs (property management fees, maintenance fees, etc) incurred exclusively for the purpose of renting out the property.
Tax Filing: Rental income must be reported on your individual tax return and paid in full by April 30th for the previous calendar year. Tax returns are filed in person.

Property owned by a Corporation

Corporate Income Tax: Montenegrin Limited Liability Companies renting out real estate have to record the rent received as regular business income, on which the standard corporate income tax rate (9% – 15%) is levied on fiscal year-end.
Company Tax Return: All corporations must file financial statements with Montenegro’s tax administration by March 31st, including property holding companies. The tax return encompasses a detailed overview of the company’s rental income against allowable expenses.
Dividend Tax: Dividend taxes are owed when a D.O.O. (LLC) distributes dividends to its shareholders. This second layer of taxation is paid at the entity level.

Non-Resident Landlords

If you are a non-resident landlord, meaning an individual or company who receives Montenegrin rental income but have your place of residence in another country, you may still have to file an income tax return. Non-resident corporate landlords are subject to a 15% withholding tax on all Montenegro source rental income.

However, in case there exists a double taxation agreement between Montenegro and your country of residence, the taxes owed may be reduced or eliminated entirely. The withholding tax must paid by February 30th every year for rental income from the previous calendar year. Non-resident individual landlords receiving rental income from real estate in Montenegro are required to file the self-assessment GPP-FL tax return and pay any tax due by April 30th.

Make sure that you stay compliant with the requirements to avoid suffering unneccessary penalties and punitive interest charges.

Exception: Company rents from Private Landlord

If a sole trader or corporation registered in Montenegro rents office space (or any other type of commercial or residential real estate) from a private landlord, the rental income tax has to be paid by the tenant in the form of a withholding tax instead of the landlord. This also applies if the private landlord is registered for Value-Added Tax (VAT), in which case the VAT also has to be withheld by the corporate tenant, and a special tax return has to be filed by the end of February.

VAT on Rentals

Value-Added Tax (VAT) is not charged on residential rent in Montenegro if the term of tenancy (rental period) is above 60 days. As a result, (corporate) landlords cannot reclaim the Value-Added Tax they have paid on their purchases (Input VAT). If the owner of the rental real estate built or acquired a new building and paid VAT on it, this VAT is not deductible.

However, VAT is charged at a newly introduced rate of (15%, which is charged from January 1st, 2025) on the rental of hotel rooms, guest house units, serviced accommodation (for example: Airbnb), and other forms of short-term holiday accommodation, including campsites and villas. The VAT registration threshold in Montenegro for corporations, sole proprietorships, but also (resident and non-resident) individuals is 30,000,00€.

If the trailing 12-month (not the calendar year!) rental income is greather than this amount, VAT needs to be charged and shown on all invoices you give to customers. Operators of short-term rental businesses (individual or corporate) can, however, choose to voluntarily register for VAT, which would allow them to deduct the incoming VAT paid to suppliers.

Landlords also have to charge VAT on commercial property rentals like shops, restaurants, and offices in case private landlords are registered for Value-Added Tax. VAT on the rental of commercial real estate is standard-rated at 21%. Under this scenario, the tenant has to withold the rental income (minus the 30% standard tax relief) and value-added taxes on the gross rental income minus VAT, and transfer it to the tax office once a month while the landlord must issue a VAT invoice.

How to report rental income?

As a private landlord renting out residential real estate, you have to report your rental income and allowable expenses on the GPP-FL, Schedule B (‘Dohotka od Imovine’), listing your total income and expenses for all rental properties combined, while separately itemizing each property on the appropriate lines of Schedule B.

If you have more than six rental properties, fill out and and attach as many Schedules B’s as are required to list all properties, however, fill in the income and expenses on only the first Schedule B, which should show the combined total of all rental properties. To be clear on how much in taxes you exactly owe, you should always consult a qualified tax professional.

Do you need help with reporting your rental income?

We can help you with filing your tax return starting from 169€