Is Montenegro a Tax Haven?

Montenegro is a small, sovereign Balkan nation with a population of just 620,000, comparable to Luxemburg – another tax-friendly European jurisdiction. Located on the shores of the Adriatic near Italy and Greece, Montenegro is just 1-2 hours away from most major cities in Europe.

Being a mountaineous country, it boasts a pristine setting, offering a healthy, laid-back lifestyle to its residents. There’s also another draw to living here: a favorable tax environment. But is it a tax haven? The short answer is no, not really. While Montenegro’s personal and business tax rates are relatively low, compared to those of some of its neighbors, Montenegro is no tax haven, at least according to the OECD’s ratings.

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KEY TAKEAWAYS

Montenegro is not a tax haven – it has no secrecy laws that block information on bank deposits from foreign tax authorities
Montenegro offers a business-friendly tax landscape with rates ranging from 9% to 15%
Montenegro applied for EU membership and is likely to join the EU within the next few years
Recent tax reforms have clearly aligned Montenegro’s tax policies with OECD due diligence guidelines

Personal Income Taxes

As a tax resident of Montenegro, you are taxed on your worldwide income, from all sources in Montenegro and abroad. Non-residents are only taxed on certain incomes from local sources such as from rental properties located in Montenegro. You must intend to spend more than 183 days and/or have your center of vital interests in Montenegro to be considered a resident for tax purposes.

A range of tax breaks and low personal income tax rates has attracted many international entrepreneurs, high-net-worth individuals, and freelancing professionals to relocate to this beautiful Mediterranean country. In total, there are three income tax rates and brackets:

Capital Gains, Inheritance, and Wealth Taxes

Unlike some of the more well-known tax havens across the globe, Montenegro imposes a tax on capital gains. Capital gains occur when investment assets such as real estate or shares increase in value, and are sold for more than they were initially bought for. Residents of Montenegro pay capital gains taxes at a flat rate of 15%, and realized losses can be carried forward.

However, Montenegro does not levy any wealth taxes, benefitting those with a high net worth. Correspondingly, there are no inheritance taxes either, which can be very advantageous for estate planning. Instead, a 3% to 5% real estate transfer tax is imposed on inherited property, which children, parents, and spouses don’t have to pay.

Property Taxes

Montenegro’s property market is open to residents and global investors with no restrictions on foreign ownership, except for agrarian land that can be only be bought through a company. Bear in mind that Montenegro also offers the popular Residency by Real Estate Program, through which anyone can obtain (tax) residency in Montenegro by purchasing residential or commercial property.

If you own real estate in Montenegro, it’s noteworthy that there property taxes range from 0.25% to 2.00% (and up to 5% for vacant urbanized land). Further, you’ll also have to pay a real estate transfer tax when buying your property, with rates ranging from 3% to 5%, levied on the real estate’s purchase price.

Business Taxation

In 2022, Montenegro enacted new tax laws to transform their single-rate tax system – the personal income tax and corporate income tax were both fixed at 9% – into progressive tax structures, with rates ranging from 9% to 15%. Dividends are taxed at a rate of 15%.