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Montenegro Tax on Foreign Income
If you are a Montenegrin citizen or resident for tax purposes, you must pay taxes on your worldwide income, not only income from sources within Montenegro. Non-residents are exempt from Montenegrin tax on foreign income. However, you may be able to claim double-taxation relief if you’re taxed in more than one country. If you receive income from any of the following sources, you likely have a tax liability:
- Wages: Wages include any income earned abroad from employment in a foreign company or self-employment
- Foreign Investment Income: Dividends and interest derived from assets abroad, including dividend stocks and savings accounts
- Foreign Rental Income: This includes all income earned from rental real estate located outside Montenegro
Tax Residency in Montenegro
Commonly, your legal residency in a given country also makes you a tax resident – this is mostly true for Montenegro. Being a resident for tax purposes, in its most elementary form, is the place where you choose to pay your personal income taxes, and where you have your center of social and economic ties.
While being a (regular) resident in a specific country means that you are registered with the immigration office and possess a temporary or permanent residence permit, tax residency is determind with a tax residency certificate (TRC), a legal document which can be obtained after six month as a (regular) resident of Montenegro.
Your tax residence status is crucial for determining your personal tax obligations. In Montenegro, you have to fullfill one of the following criteria to be considered a resident for tax purposes:
- spend more than 183 days in Montenegro, and
- have your center of vital interests in Montenegro, which is normally the case if you send your children to school, own real estate, and/or carry out income-generating activities from Montenegro
For the most part, a Tax residency certificate proves to another, often a high-tax country, that you legally reside in Montenegro and have opted to pay your personal income taxes here. Some countries, especially those in which you were previously a tax resident, or, your country of citizenship, frequently ask for a TRC to confirm that you are a tax resident of Montenegro.
Tax Relief and Double Taxation
Since Montenegro has signed double taxation agreements with more than 40 countries on income and property, as a Montenegrin resident you can typically claim Foreign Tax Credit Relief when reporting your overseas income in your tax return so that you won’t be taxed twice.
How much tax relief you get depends on Montenegro’s ‘double-tax treaty’ with the country your income’s from. In most cases, you still usually can claim a relief even if no double taxation agreement exists, unless the foreign income is not classified as Montenegrin income tax or Capital Gains Tax.
However, you might not be able to reclaim the full tax amount of tax paid to the tax office abroad, and you’ll likely get back less in case the income would have been taxed at a lower tax rate in Montenegro or the withholding tax rate, which is set by the double-tax treaty between both countries, would foresee a smaller amount.
Reporting Your Foreign Income
Generally speaking, as a resident of Montenegro earning foreign income or realizing capital gains, you are obliged to report it in your annual tax filing on the GPP-FL, Schedule F for individual taxpayers. Additionally, you may also have to report a few other domestic tax forms in case you have also earned income from sources in Montenegro like 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 on the foreign income. Further, you may also have to pay social contributions. Montenegro’s foreign income tax isn’t black and white. As a consequence of all the provisions, schedules, and filing requirements, it is to your best advantage to let the trusted advisors at Adriacom Expat Tax Services handle your tax affairs.
Do you need help with reporting your foreign income?
We can help you with filing your tax return starting from 169€