Montenegro Tax on Foreign Income
If you are a tax resident of Montenegro, you must pay taxes on your worldwide income, not just on income from sources within Montenegro. However, you may be eligible to claim double-taxation relief if your income is taxed in more than one country. If you reside in Montenegro and receive income from any of the following sources, you are likely to have a tax liability:
- Wages: This includes any income earned abroad from employment with a foreign company or from freelance services for a foreign client
- Foreign Investment Income: Dividends and interest derived from assets abroad, including dividend-paying stocks and savings accounts
- Foreign Rental Income: This includes all income earned from rental real estate located outside Montenegro
Tax Residency in Montenegro
Being a resident for tax purposes, in its most elementary form, means the place where you choose or are required to pay personal income taxes, and where you have your center of social and economic ties. Tax residency can be proven with a Tax Residency Certificate (TRC), a legal document that can be obtained after six months as a registered resident of Montenegro.
Your tax residency status is crucial in determining your personal tax obligations. A Tax Residency Certificate serves as proof to another country – often a high-tax jurisdiction – that you are legally a tax resident of Montenegro. You must meet one of the following criteria to be considered a resident for tax purposes:
- Spend more than 183 days per year in Montenegro, or
- Have your center of vital interests in Montenegro, which is typically the case if you send your children to school there, own real estate, and/or carry out income-generating activities from Montenegro
Tax Relief and Double Taxation
Montenegro has signed double taxation agreements with more than 40 countries covering income and property. As a Montenegrin tax resident, you are typically eligible to claim Foreign Tax Credit Relief when reporting overseas income, to avoid being taxed on the same income twice. In some cases, you can still claim relief (unilateral relief) even if no double taxation agreement exists.
However, you may not always be able to reclaim the full amount of tax paid abroad, and the refund could be lower if the income had been taxed at a lower rate in Montenegro, or if the withholding tax rate set by the double taxation treaty between the two countries foresees a smaller amount.
Reporting Your Foreign Income
Generally, as a resident of Montenegro earning foreign income or realizing capital gains, you are required to report it on your annual tax return using the GPP-FL, Schedule F, for individual taxpayers. In addition, you may need to file other domestic tax forms if you also earn income from Montenegrin sources, such as Schedule B for rental property income.
For income earned abroad while working as a contractor or freelancer, you may be considered self-employed for tax purposes and still have to pay taxes and social security contributions on that income. To avoid penalties, it is in your best interest to have the trusted advisors at adriacom Expat Tax Services manage your foreign income taxes.
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