If you open a company in Montenegro, you take on certain obligations related to submitting accounting reports and paying taxes.
Let’s talk about taxes. We will look at two different situations:
- What taxes a company in Montenegro pays if it does not operate and is opened only to obtain a residence permit (residence permit = “boravak”).
- What taxes a company pays if it is running a real business.
1. Taxes for a Non-Operating Company
If a company is opened solely to obtain a residence permit and does not do any business, it pays only taxes on the director’s salary. Since the company is not active, there is no point in the director paying himself a high salary. Almost always, the director receives the minimum wage.
At the time of writing, the minimum wage in Montenegro is €450. Taxes on this salary are €115.56, plus €3.58 in union and chamber of commerce membership fees. So the monthly tax obligations of a non-operating company are just under €120.
2. Taxes for an Operating Company
If a company is running a real business, it must pay a wider range of taxes. In addition to the ones listed below, there may be other taxes such as excise taxes, real estate tax, or vehicle tax. However, those are quite rare and don’t apply to most companies.
Here are the main taxes an active company pays:
VAT (Value Added Tax)
The standard VAT rate in Montenegro is 21%. The law also includes a reduced rate of 7% and a zero rate. For more details, see the article “VAT in Montenegro.”
You do not need to pay VAT until your annual revenue exceeds €30,000. So if your company is very small, you can avoid paying VAT altogether.
VAT is also not paid on exported goods and services.
Once your revenue exceeds the threshold, you must submit an application to the tax authority, after which you’ll receive a decision confirming VAT registration.
VAT reports must be submitted monthly by the 15th, and the tax must be paid during the same period.
Corporate Income Tax
Profit in Montenegro is calculated in the standard way: income minus expenses. Most business expenses are deductible right away, though there are exceptions. For example, when purchasing a fixed asset, the cost is deducted over several years through tax depreciation.
The tax year in Montenegro is the calendar year.
Corporate income tax in Montenegro is progressive:
- If your profit is up to €100,000, the tax rate is 9% – one of the lowest in Europe.
- For profit above €100,000, the amount over €100,000 is taxed at 12%.
- If your profit exceeds €1,500,000, the amount above €1.5 million is taxed at 15%.
Dividend Tax
Money received by the company can be transferred to a personal account either as salary or dividends. In both cases, tax must be paid. We’ll talk about salaries below — let’s look at dividends now.
The dividend tax in Montenegro is 15%. Dividends can be paid after submitting the annual report, typically in the first quarter. The tax is paid at the same time as the dividend distribution.
Prirez na porez
This is a small additional tax on tax, applicable in certain cases — for example, if the salary exceeds a certain amount defined by law or when dividends are paid. The rate varies depending on the municipality.
Pozajmici Tax
This tax was introduced to close a loophole. In the past, some business owners avoided paying the 15% dividend tax by taking an annual loan from their company instead of paying themselves dividends. The loan would be “repaid” the following year and replaced by a new, larger loan — continuing indefinitely.
In 2023, the government closed this loophole with the pozajmici tax. Now, if your company gives you a loan, it must pay 15% tax on the loan amount.
This method of avoiding dividend taxes is now no longer in use.
Payroll Taxes
In 2022, Montenegro introduced a major tax reform. The government doubled the minimum wage and at the same time significantly reduced payroll taxes. This helped boost average salaries, and in the two years since, Montenegro has seen one of the highest salary increases in Europe.
A new tax reform, called “Reform 2.0,” has been announced. It will once again lower payroll taxes and raise the minimum wage. This is expected to raise both minimum and average wages, improving the population’s living standard. The exact timeline is not yet known, but the reform is planned for implementation within a year.
Despite tax cuts in 2022, Montenegro’s budget did not suffer. Although the percentage dropped, the base salaries increased, so tax revenue remained stable.
Payroll taxes in Montenegro are progressive — the higher the salary, the higher the tax. There is no fixed rate, so each case must be calculated individually. However, here are some examples:
- For a net salary of €800, the tax is €246.45
- For €1000, the tax is €357.17
- For €1200, the tax is €470.33
- For €1500, the tax is €640.06
Payroll taxes are paid monthly by the 15th, along with the payroll report.
Dear friends,
You can contact the author of this article with questions about opening or closing companies in Montenegro, obtaining a residence permit, or accounting services.
