If your company is operating, you generate profit. At least, I hope your company is profitable. Accordingly, you may need to withdraw this profit from the company’s account to a personal account — in other words, to your own account. Let’s talk about how to do this.
There are two ways to get money from your company, each with its own pros and cons, which we will cover today. You can either receive a salary or dividends.
Dividends
Dividends in Montenegro are paid once a year, after filing the annual financial report. The financial statements must be submitted by the end of March, so you can receive dividends for the previous year in the first quarter.
After submitting the financial statements and profit report, if the company is profitable, it becomes obliged to pay corporate income tax. Only after that will it be clear how much can be distributed as dividends.
Company profit is calculated using the standard formula: income minus documented expenses. You can count as expenses anything related to the company’s activities — for example, director’s salary, payroll taxes, accountant’s services, communication, business trips, and other costs.
Corporate Income Tax in Montenegro:
- If the profit does not exceed €100,000 – 9%
- If the profit is more than €100,000 but less than €1.5 million –
- the first €100,000 – 9%,
- the amount exceeding €100,000 – 12%
- If the profit exceeds €1,500,000 –
- up to €100,000 – 9%,
- up to €1.5 million – 12%,
- above €1.5 million – 15%
So, at the beginning of the year, the process looks like this:
GROSS profit – corporate tax = retained earnings, which can then be distributed as dividends among the shareholders (or the sole founder of the LLC).
When paying out dividends, you pay a 15% personal income tax, plus a “prirez na porez” (a small surtax on tax, the rate of which depends on the municipality).
Example:
Let’s imagine your company earned €100,000 net profit for the year. January has arrived, meaning it’s time to receive dividends. How much will you actually get?
- Corporate tax on €100,000: €9,000
- Personal income tax on, say, €76,000 in dividends: €11,400
- Prirez na porez (example: 13%): 13% of €11,400 = €1,482
Total taxes paid:
€9,000 (corporate) + €11,400 (income) + €1,482 (prirez) = €21,882
Cash in hand:
€76,000
Remaining on company account:
About €2,118
As you can see, taxes in Montenegro are significantly lower than in Western Europe. Running an active business in Montenegro is much more cost-effective than in Germany, France, Spain, or other high-tax countries.
Salary in Montenegro
Salary taxes are progressive — the higher the salary, the higher the tax. In other words, the rich pay more, the poor pay less, which is generally fair.
Salary is paid monthly, strictly from the company account to the employee’s account. Cash or other forms of payment are not allowed — only bank transfers.
Since taxes depend on salary size, they always vary. Therefore, it’s impossible to describe them fully in one article. But I have prepared some screenshots that show the tax amounts for different salaries, giving a general idea.
Tax Examples:
- NET salary €591.50 — company pays €156.59 in taxes
- NET salary €800 — company pays €246.45 in taxes
- NET salary €1,500 — company pays €640.06 in taxes
- NET salary €2,500 — company pays €1,205.81 in taxes
You can see: the higher the salary, the higher the tax. You can also see that once salary exceeds a certain level, salary taxes become higher than dividend taxes.
The Best Way to Withdraw Money
The optimal approach is to pay yourself a small monthly salary of €591.50. If you have a wife, pay her the same amount (after the second year of residency under family reunification, she gains the right to work in Montenegro and can be employed by your company).
This way, you receive double the amount monthly, and your spouse also gains pension rights.
Why exactly €591.50? Because it is the threshold with minimal taxes. If your NET salary goes above this, a higher tax coefficient kicks in, increasing your tax burden.
The rest of the money should be withdrawn annually as dividends.
This is the most tax-efficient plan. If you have savings, there is no difficulty following this plan, where you receive the majority of your income once a year (January–March). However, if you have no savings, you may need to adjust the plan, increase your salary, and pay more taxes.
Conclusion?
You should aim to build up savings.
You can contact the article’s author for questions regarding company formation in Montenegro, residence permits, or accounting services.
