Taxes in Montenegro: Everything you need to know

The Montenegrin tax system is residency-based. Tax residents must pay income to the Tax Administration of Montenegro on their worldwide income. This system differs from a territorial tax system, which only taxes income earned within the country (and not foreign income), and from a citizenship-based taxation system, such as that of the United States.

SUMMARY: TAXES IN MONTENEGRO

Montenegrin companies pay a progressive corporate income tax ranging from 9% to 15%.
Non-resident companies are taxed on their Montenegro-sourced income at a flat rate of 15%.
Value-Added Tax (VAT) in Montenegro is applied at four rates: 21% (standard), 15% (reduced I), 7% (reduced II), and 0% (zero-rated goods and services).
Residents of Montenegro pay a 15% tax on capital gains, dividends, interest, and rental income.
Corporations must file their annual tax returns by March 31st.
Individuals must file their annual tax returns by April 30th.

Corporate Tax

Taxes for businesses in Montenegro are relatively moderate. The corporate income tax rate is progressive and ranges from 9% – 15%. See below for an overview of the three corporate tax brackets:

Businesses pay 9% corporate tax on annual net profits of up to 100,000€.
The corporate tax rate is 12% for yearly profits between 100,001€ and 1,500,000€.
Profits above 1,500,001€ are taxed at 15%

The progressive tax rates mentioned above are marginal, meaning each rate applies only to income within its specific bracket. For example, if your business had a taxable income of 300,000€ in 2025, the portion of income within that bracket would be taxed at 12%. However, this does not mean you pay 12% on your entire income.

Instead, you pay 9% on the first 100,000€ and 12% on the remaining amount.

Total taxes: 9,000€ + 24,000€ = 33,000€

Let’s look at another example.

Suppose your yearly net profit is 110,000€. Your effective tax rate would be 10.2%, resulting in a total corporate tax of 10,200€ (9,000€ + 1,200€).

Note: Taxes in Montenegro are calculated and adjusted in accordance with IFRS (International Financial Reporting Standards).

Companies that realize profits from the sale of land, property, property rights, or financial instruments must record these gains in their accounts and pay capital gains tax on the proceeds. Capital gains are reported separately from regular business income, and any capital losses can be carried forward for up to 5 years.

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Personal Income Tax

For personal income tax purposes, Montenegro has two tax brackets: 9% and 15%. Your individual tax bracket depends on your earnings and the type of income you receive.

The Tax Administration of Montenegro recognizes three main types of personal income:

Employment income
Income from sole trader activity or self-employment (partners in a partnership, gig workers, independent contractors)
Interest, dividend, royalty, and rental income

Employment income:

Monthly net wages below 700€ are tax-exempt.
Income between 701€ and 1,000€ is subject to a 9% salary tax.
Income above 1,001€ is taxed at 15%.

Self-employment and liberal professions:

Annual income up to 8,400€ is tax-exempt.
Income between 8,401€ and 12,000€ is taxed at 9%.
Income above 12,001€ is taxed at 15%.

Rental, dividend, royalty, and interest income are taxed at 15%, regardless of amount.

Capital Gains Tax

In short, capital gains are the profits earned from the sale of real estate or financial assets. For example, if you buy a property or shares in a company for 100,000€ and later sell them for 150,000€, you have realized a capital gain of 50,000€. At Montenegro’s flat 15% capital gains tax rate, you would owe 7,500€ in taxes (50,000€ × 0.15 = 7,500€).

Info: Capital losses may be carried forward and offset against future gains for up to five years. Individuals without Montenegrin tax residency are taxed only on capital gains derived from sources within Montenegro.

Dividend Tax

If you are a shareholder in a foreign or local company and receive dividend income as a Montenegrin tax resident, you are required to pay tax on it. Dividends are taxed at a flat rate of 15%, which is withheld at source by the payer in the case of local companies. For dividend income received from abroad, you must declare it in your annual GPP-FL personal income tax return.

Rental Income Tax

Rental income in Montenegro is taxed at a flat rate of 15% after fixed allowable deductions. A standard 30% expense deduction is applied to long-term rental properties, whereas landlords of short-term rental properties (such as Airbnb or Booking.com rentals) are allowed to deduct 50% (70%) of the gross rental income:

30% deduction on total long-term rental revenue.
50% deduction on short-term rental income, if you are officially registered in Montenegro’s tourist tax system.
70% deduction on short-term rental income received through official travel agent bookings.

These deductions are applied automatically and do not need to be documented. However, you can still choose to record your actual expenses if you believe it would reduce your taxable income.

Example 1:
You rent out an apartment in Montenegro for a monthly rent of 1,000€. You would pay the following rental income taxes:

Annual rental income: 12,000€
Minus 30% allowable deduction: 8,400€
Tax due: 8,400€ × 15% = 1,260€

Example 2:
You have two vacation rentals listed on Airbnb and Booking.com that together generate 32,000€ per year. Since you are officially registered with Montenegro’s tourist tax system, you are entitled to a 50% deduction on your gross rental income:

Annual rental income: 32,000€
Minus 50% allowable deduction: 16,000€
Tax due: 16,000€ × 15% = 2,400€

Payroll Tax and Social Security Contributions

Employee salaries are subject to various taxes and contributions at both the state and municipal levels in Montenegro. All of these are withheld by the employer from the employee’s gross salary and paid monthly.

National taxes and contributions:

Income tax (9% -15%)
Pension and disability insurance contributions (social security) (10%)
Health care contributions (currently 0%)
Unemployment insurance contributions (1%)

Municipal level:

Municipal surtax (13% – 15%)

In addition, there are three additional monthly contributions employers must pay:

Contribution to the Labor Fund (0.20%)
Mandatory contribution to the Chamber of Commerce (0.27%)
Contribution to the Labor Union (0.20%)

Personal Income Tax Rates in Montenegro

Personal income tax in Montenegro is progressive and marginal, ranging from 0% to 15% for employees. For a monthly salary of less than 700€ (gross) per month, you do not need to pay any income tax. On monthly gross salaries between 700€ and 1,000€ a 9% income tax is levied only on the portion exceeding 700€. Monthly salaries above 1,000€ are subject to the top marginal tax rate of 15%.

Pension and Disability Insurance Contributions

As of October 1, 2024, following the Europe Now 2 tax reforms, the combined pension and disability contribution rate has been reduced from 20.5% to just 10%. Employers are now exempt from paying social contributions, while the employee’s contribution has decreased from 15% to 10%. These contributions go into the Government of Montenegro’s social security fund to finance pension obligations.

Health Insurance Contributions

The Europe Now 1 tax reform of 2022 abolished compulsory health insurance contributions for both employers and employees. Before this regulation, 8.5% of gross salary was withheld from the employee and 2.3% from the employer.

Unemployment Insurance Contributions

As of 2025, the unemployment insurance contribution totals 1.0% of gross salary, with employers and employees each paying 0.5%. These contributions help finance Montenegro’s employment services, including the national job center (Zavod za zapošljavanje Crne Gore or simply ZZZCG).

Municipal Surtax

Municipalities in Montenegro charge a surtax on salaries exceeding 700€. Rates vary between 10% and 15%, depending on the municipality: 10% in Budva, 13% in Bar, and 15% in Podgorica and Cetinje. Since this is a surtax (a tax on tax), the actual amount owed is relatively small. For example, for a net wage of 1,000€, a 15% surtax would amount to 9.94€, not 15% of the total salary.

Value-Added Tax (VAT)

Value-Added Tax in Montenegro is known as PDV (Porez na dodatu vrijednost). Suppliers of goods or services registered for VAT in Montenegro must charge the applicable VAT rate and collect the tax for onward payment to the Tax Administration of Montenegro through a monthly VAT return.

The standard VAT rate in Montenegro is 21%. It applies to most taxable goods and services. The two reduced VAT rates are 15% and 7%. Montenegro also applies a zero rate (0%) to certain goods and services. These transactions must still be reported in your monthly VAT return as zero-rated, even though no VAT is charged.

The first reduced VAT rate (15%) applies to books, hairdressing services, admission to cultural and sports events, hotels and holiday accommodation, food and non-alcoholic beverage services in hotels and restaurants, marina services, solar panels, copyright services in education, literature, and science, and the non-profit use of sports facilities.

The second reduced VAT rate (7%) is levied on essential goods and services like food products (meat, milk, bread, oils, eggs, sugar), animal food, fertilizers, medicines (also for animals) & medical devices, textbooks, newspapers, funeral services, menstrual products, baby diapers, and public transport.

The following goods and services in Montenegro are subject to a 0% (zero) VAT rate:

The export of goods and services, including transport and services directly related to exports
Freelancers and companies providing digital or cross-border services over the internet
International air and sea transport of passengers and goods
Fuels and supplies for maritime charter or commercial vessels (not private leisure use)
Oil drilling services (exploration)
International postal services
Delivery of humanitarian aid
Supply of goods within customs warehouses or free zones

Vat-registered businesses supplying zero-rated goods/services can claim input VAT on purchases related to those supplies. Businesses and individuals whose taxable turnover exceeds 30,000€ within a rolling 12-month period are required to register for Value Added Tax.

Real Estate Tax

If you own property in Montenegro, as a resident or non-resident, it’s crucial to understand the various taxes that apply. Whether you rent out an apartment in Kotor Old Town, maintain a holiday home in Tivat, or plan to sell a villa on the Budva Riviera, you will encounter taxes at different stages of ownership.

1. Annual Property Tax

Property taxes are proportional to the estimated market value (as determined by local tax authorities) of the property, typically ranging from 0.25% to 1.00% per year. They are paid in two equal installments with deadlines on June 30th and October 31st, with taxpayers notified by mail no later than the end of April each year.

Applies to:

Agricultural and urbanized land
Finished and semi-finished property (commercial and residential)
Basements, non-residential spaces, and garages

2. Real Estate Transfer Tax

The real estate transfer tax is is typically borne by buyers on all transactions involving immovable property (houses, apartments, commercial real estate, and land), except for newly built properties purchased directly from a developer. The tax rate depends on the assessed value of the property:

3.00% for property values up to 150,000€
5.00% for property values between 150,001€ and 500,000€
6.00% for property values above 500,001€

Since Montenegro does not levy a separate inheritance or gift tax, transfers made through inheritance or gifting are subject to the real estate transfer tax. However, transfers between relatives of the first hereditary order (such as parents, children, or spouses) are exempt. Additionally, no tax is applied if the property represents the taxpayer’s primary and only residence.

Double Tax Treaties & Tax Residency

Double Tax Treaties are agreements between two contracting countries, primarily designed to allocate taxing rights and prevent the same income or capital from being taxed in both jurisdictions. Montenegro currently has DTTs in force with the following 43 countries:

Albania, Austria, Azerbaijan, Belgium, Belarus,
Bosnia, Bulgaria, China, Croatia, Cyprus,
Czech Republic, Denmark, Egypt, Finland, France,
Germany, Hungary, India, Ireland, Italy, South Korea,
Kuwait, Latvia, North Macedonia, Malaysia, Malta, Moldova
Netherlands, Norway, Poland, Portugal, Romania, Russia,
Serbia, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland
Turkey, Ukraine, United Arab Emirates, United Kingdom

Double Tax Treaties reduce or eliminate withholding taxes on dividends (e.g., from 15% to 5% for Malta, Hungary, and France if the recipient company owns at least 25% of the shares of the Montenegrin company), interest payments, or income from royalties. This helps multinational businesses and investors maximize their returns on cross-border payments.

To claim the benefits under a Double Tax Treaty, the Tax Administration of Montenegro typically requires proof of tax residency (i.e., a tax residency certificate) filled out and stamped by the relevant authority of a treaty country.

Tax Residency in Montenegro

Whether or not you are a Montenegrin citizen, the Tax Administration of Montenegro considers you a tax resident if you meet one of the following criteria:

You are physically present in Montenegro for 183 days or more during a year.
You have your center of business and personal interests (such as family, property, or economic activity) established in Montenegro.

Being a tax resident of Montenegro means paying taxes on your worldwide income. This can include investment income, dividends, royalties, interest payments, and more. Montenegrin tax residents enjoy low personal income tax rates and the ability to legally optimize their global income streams.

Once the residency criteria are met, you can apply for a tax residency certificate at the municipal tax office where you are registered, after six months of being a legal resident. The TRC is issued for one year and must be renewed annually to maintain your status as a Montenegrin tax resident.

Non-Resident Taxation

Non-residents of Montenegro (both individuals and companies) pay tax only on income sourced in Montenegro and may benefit from Double Tax Treaty provisions, whereas tax residents pay taxes on their worldwide income and cannot use these provisions.

Branch Income Tax

Non-resident foreign companies doing business in Montenegro through their branches pay progressive taxes (9% – 15%) on their Montenegro-derived income, the same as resident companies. Tax authorities treat branches as permanent establishments.

Note: If the business is incorporated or has its place of effective management in Montenegro, it is considered a resident legal entity for tax purposes rather than a branch.

Corporate Withholding Taxes in Montenegro

In Montenegro, withholding taxes are enforced on dividends, capital gains, interest payments, royalties, rental income, intellectual property fees, market research and consulting fees, audit service fees, and income from sports or artistic events held in Montenegro. The withholding tax rate is 15% and is levied on all Montenegro-sourced income.

You may be able to reduce or eliminate withholding tax if your country of tax residence has a Double Tax Treaty (DTT) with Montenegro. Two conditions apply:

You must provide proof of ownership of the income to be distributed.
You must hold a valid tax residency certificate, signed and stamped by your foreign tax authority.

Compliance and Reporting

Montenegrin income tax for resident taxpayers is paid via the Montenegrin withholding tax system. Withholding taxes apply to wages, social security contributions, and dividends paid by Montenegrin companies. For income not subject to withholding, such as income from self-employment, capital gains, and rental income, taxpayers must report and pay tax through a self-assessment process.

Both resident and non-resident taxpayers must file annual income tax returns in Montenegro for the previous calendar year by March 31 for companies and April 30 for individuals. Based on the return, the Tax Administration of Montenegro issues a tax bill, which must be paid within the deadline specified in the notice to avoid penalties (late payment interest of 0.03% per day) for non-compliance.

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