Montenegro Personal Income Tax

For Montenegrin residents, nearly all income earned domestically or from foreign sources, is liable to personal income tax. The tax is charged progressively as a percentage of your gross monthly income, meaning that the tax rate increases with higher incomes. This is achieved by marginal tax brackets that group Montenegrin taxpayers by monthly income:

In Montenegro, there are three tax brackets. Each of these ‘layers’ of your monthly income is taxed at a progressively higher rate. The marginal tax rate is the rate at which your last Euro of income is taxed whereas the first Euros are taxed at lower rates. Here’s how that works for someone with a taxable income of 2,000€ per month:

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The portion from 0 – 700€ is excempt from personal income taxes
The portion from 700,01€ – 1.000,00€ is taxed at a rate of 9%
The portion above 1.000,01 is taxed at a rate of 15%

Total taxes owed per month: 0€ + 27€ + 150€ = 177,00€

As you can see from the calculation above, you don’t pay the highest rate on your entire income, in which case you would have paid 300,00€ instead of 177,00€. Be mindful however that personal income taxes are only one part of the overall tax burden because social contributions are also levied on the income from employment.

Income Tax Allowances

While reident (and in some caes non-resident) taxpayers have to pay income taxes on the money they receive on their bank account, there are some exceptions to the rule, including the following:

travel allowances employers provide
short-term per diem allowance for each travel day abroad
monthly field allowance (up to 100€ monthly)
living-away-from-home allowance (up to 100€ monthly)
bereavement allowance (up to 1.500€)
illness benefit for employee and 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 atheletes (up to 300€ monthly)

Who does not pay personal income taxes?

Employees of diplomatic and consular representations as well as the United Nations’ in-country technical assistance mission, including their staff and family members, are excempt from Montenegrin income tax on salaries paid to them by the foreign Government or international organization. These interests are also granted to non-resident officials, consultants, and the admin staff of other international organizations.

Sources of Personal Income

Besides income from employment as outlined above, personal income tax in Montenegro is levied on:

the sale of capital assets (see: Capital Gains Tax in Montenegro)
income from proprietorships and partnerships
taxable interest and rental income
income from royalties
payments to professional athletes, entertainers, and artists

A Montenegro resident’s worldwide income is subject to personal income taxes in the same way as a Montenegrin citizen. Taxation of personal income in Montenegro is based on the individual’s residency status, and non-residents are only taxed on all income sourced from a permanent establishment in Montenegro such as rental income from real estate.

Taxation of Sole Proprietorships and Partnerships

Unlike limited liability companies (D.O.O.’s) that are subject to corporate income taxes in Montenegro, the income earned from sole traders and partnerships is taxed as ordinary income and reported on the individual’s GPP-FL tax return at the same progressive tax brackets as applied to wages and salaries.