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 from both residential and commercial properties (including land) is subject to taxation, but related expenses can be deducted from your gross rental income in the year they are incurred.
Individual 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 annual tax return by April 30th. Real estate holding companies are taxed separately and must include this income with their other business earnings.
As a tax resident of Montenegro, you are taxed on your worldwide income, and your rental income from properties abroad may also be subject to personal income taxes in Montenegro. Additionally, if you decide to sell your rental properties in Montenegro for a profit, you may have to pay capital gains taxes as well.
What is Rental Income?
Rental income is the total Euro amount of all payments you receive from tenants for the short- or long-term use of your rental property. As a private or corporate landlord, you must pay tax on the rental income from all your properties. When receiving advance rent (paid more than one month ahead), 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 located in Kotor to a restaurant owner. You receive 20,000.00€ for the first lease year and another 20,000.00€ for the final year of the lease. In this case, you would report 40,000 € on your tax return for the first year. Similarly, security deposits are considered advance rent.
When you share ownership of a rental property in Montenegro, each co-owner is responsible for reporting their portion of the rental income to the Tax Administration of Montenegro. If your tenant terminates their lease in exchange for a lease breakage fee, the amount received is considered rental income for the year it is paid and must be included in your tax return for that period.
If you have given your tenant a lease option to purchase the property in the future, all payments received under that agreement must be recorded as rental income in the period you receive them. If you offer the property in exchange for services from the tenant, you must report the fair market value of those services as rental income.
Available Deductions/Expenses
While all rental income in Montenegro is subject to taxation and there is no property allowance, owners of rental property are allowed to deduct certain rental-related expenses, such as:
- Property taxes
- Mortgage interest
- Asset depreciation
- Rental property insurance
- Property management fees
- Home inspection costs
- Fees for marketing and advertising
- Operating and maintenance costs for the property
If the property is owned by a limited liability company, all expenditures must be properly documented. As a private landlord, you can choose either the fixed allowable expenditures system or document all rental expenses (property management fees, maintenance fees, etc) individually using invoices, receipts, official vendor statements, credit card statements, and similar records.
Here are the fixed allowable expenses you can deduct from your rental income as a lump sum:
- 30% of your total long-term rental income
- 50% of short-term rental income, provided you are officially registered with Montenegro’s tourist tax system
- 70% exemption from taxation on short-term rental income received through official travel agent bookings
This means that for long-term rentals, private property owners are eligible to deduct 30% of their total gross rental income as a tax-free lump-sum allowance, and to pay rental income tax only on the remaining 70%. Private landlords offering short-term rentals can deduct 50% of their rental income (or 70% if the income comes through travel agent bookings) from taxation.
Rental Tax Calculator
To calculate the annual net profit from all your rental units combined, subtract your total deductible expenses and taxes from your total rental income. Fill in the fields for short-term and long-term rentals below to instantly calculate your rental income tax.
Note: Rental income from foreign real estate must be reported separately as foreign income on the GPP-FL, Schedule F (‘Dohodak ostvaren izvan Crne Gore’).
Tax Return Filing
If you own rental property in Montenegro, whether it’s a serviced apartment, holiday villa, or long-term rental, you must report your rental income through the GPP-FL form (for individual taxpayers) or your corporate tax return. Keep the following points in mind:
Property owned by an Individual
- Individual Income Tax Return: Individual landlords must complete and submit the GPP-FL form, reporting total rental income minus any expenses and/or allowances.
- Property Income: Income from both short-term and long-term rentals in Montenegro is considered property income and is taxed at a rate of 15%.
- Rental Property Allowance: Individual property owners can deduct up to 30% of their long-term rental income, and up to 70% for short-term rentals.
- 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 at the local tax office.
Property owned by a Corporation
- Corporate Income Tax: Montenegrin Limited Liability Companies renting out real estate have to record rental income as regular business income, which is subject to the standard corporate income tax rate of 9% to 15% at the end of the fiscal year.
- Company Tax Return: All corporations must file annual accounts with the Tax Administration of Montenegro by March 31st, including property holding companies. This statement provides a detailed overview of the company’s rental income and allowable expenses.
- Dividend Tax: Dividend taxes are owed when a D.O.O. (LLC) distributes dividends to its shareholders. This represents a second layer of taxation and is withheld by the company.
Non-Resident Landlords
Even if you reside outside Montenegro, you may need to file a tax return if you receive rental income from real estate located in Montenegro. Non-resident corporate landlords are also subject to a 15% withholding tax on all rental income sourced from Montenegro, which must be paid by February 30th every year for rental income from the previous calendar year.
However, if a double taxation agreement between Montenegro and their country of residence exists, the taxes owed may be reduced or eliminated entirely. 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.
Note: Make sure you stay compliant with all requirements to avoid unnecessary penalties and interest charges.
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Exception: Rental Payments from a Company to a Private Landlord
If a private landlord receives rental income from either a sole proprietorship or a corporation registered in Montenegro, it has to be paid by the tenant in the form of a withholding tax instead of the landlord. This rule also applies if the landlord is registered for Value-Added Tax (VAT). In this case, the business that rents the property must withhold the VAT it owes and submit a special tax return by the end of February.
VAT on Rentals
Value-Added Tax (VAT) is not charged on residential rent if the tenancy (rental period) exceeds 60 days, and VAT-registered (corporate) tenants cannot reclaim the rent as Input VAT. However, rental income from commercial real estate, such as shops, restaurants, and offices, is subject to the standard 21% Value-Added Tax withholding for VAT-registered landlords.
For short-term accommodation, VAT is charged at 15% on the rental of hotel rooms, guesthouse units, serviced accommodations (e.g., Airbnb), and other holiday rentals, including campsites and villas. Any business or individual earning more than 30,000€ in a year from rentals must register for VAT and include it on their invoices.
How to Report Your Rental Income?
As a private landlord renting residential real estate, you must report your rental income and allowable expenses on the GPP-FL, Schedule B (‘Dohodak od Imovine‘). List the total income and expenses for all your rental properties combined, while separately itemizing each property on the appropriate lines of Schedule B.
If you have more than six rental properties, attach as many Schedule Bs as needed to list all your properties. However, report the total income and expenses on only the first Schedule B, which should show the combined totals for all properties. To know exactly how much tax you owe, you should always consult a qualified tax professional.
Need help with reporting your rental income?
Start your filing today with adriacom. Quick, simple, and affordable.
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