The Law on Personal Income Taxation applies to both residents and non-residents who receive income from sources defined by this law.
Who is considered a resident?
According to this law, a resident of Montenegro is an individual who:
- Has a place of residence in Montenegro; or
- Has Montenegro as the center of their business or personal interests.
Additionally, the person must live in Montenegro for more than 183 days during the tax year.
Residents pay taxes on income earned both within Montenegro and abroad.
Note from EVROPARTNER: I don’t know a single foreigner who pays taxes on income earned outside of Montenegro. Most foreigners living here are freelancers, and currently, no one monitors income earned outside the country. This situation is unlikely to change in the next 10–20 years.
Taxation of non-residents
In contrast to residents, non-residents only pay taxes on income earned within the territory of Montenegro.
Types of income not subject to personal income tax
According to the law, the following types of income are not taxed in Montenegro:
- Disability benefits
- Child allowances
- Social support and humanitarian aid
- Financial aid for victims of natural disasters
- Health insurance compensation
- Income received through gifts or inheritance
- State awards established by law
- Pensions
- Income from gambling and prize games
Important: This point is key. Many professional poker players live in Montenegro, and this country suits them well. According to the law, income from games (including poker) is not subject to taxation.
- Various insurance payouts (life, property, belongings, etc.)
Other tax-free incomes
In addition to the above, the law includes 18 more types of tax-free income. These apply to specific situations that do not concern most foreigners living in Montenegro, so they are not listed here.
Income tax rates
- If your income is below €720, the tax rate is 9%
- For the part of the income above €720, the tax rate is 11%
Note: In recent years, personal income tax rates have been lowered multiple times. When I came to Montenegro in 2011, the rate was 15%. Now it’s only 11% on income above €720, which is very low by European standards.
Types of income that are taxed
Taxes must be paid on all personal income, except for those listed as tax-free above. This includes:
- Employment income (salaries, bonuses, etc.)
- Independent activity (for example, legal work in some cases)
- Real estate income
- Capital income
Taxes on dividends
Dividends from commercial activity in Montenegro are subject to personal income tax. There are many foreign companies in Montenegro — some are “empty shells” created just for residency, while others are active and affected directly by this law.
If you want to learn how to open a company in Montenegro, check our website or request the guide by email.
Don’t confuse corporate income tax with personal income tax — they are not the same. If you want to know how much tax you will pay after opening a company in Montenegro, contact me for a consultation. My contact info is available on this site.
So, if you withdraw dividends from your Montenegrin company, you will pay:
- 9% on income up to €720, and
- 11% on any amount above that.
Tax deductions: rental income example
You can deduct certain expenses from your income to reduce the taxable amount. Let’s see how this works with rental income.
Montenegrin law allows individuals to rent out up to 5 apartments (or 15 beds). If you have a spouse, that number doubles. This means you don’t always need to register a hotel to rent out property. Hotels are required only if you exceed these limits. If you stay within them, you can rent as an individual — which is beneficial, because individuals pay lower taxes and don’t have to pay VAT.
What expenses can be deducted?
- 50% of rental income is tax-free if the tourist fee (boравишна такса) is paid. This means you’ve registered your guests at the police and they’ve paid the tourist tax.
- For example: if you earn €5,000 per year from renting out an apartment, €2,500 is tax-free, and you pay tax only on the remaining €2,500.
- If you have a contract with a local tourist agency and rent out the property through them for at least 60 days per year, 70% of the rental income is tax-free.
- You pay tax only on the remaining 30%.
For other types of property (not real estate), a 30% tax deduction applies.
Final thoughts
Overall, this law is very favorable — much better than similar laws in other European countries. Montenegro has exceptionally low personal income tax rates, and many income types are exempt from tax.
For example, in most countries, inheritance is taxed — but in Montenegro, it is not.
If you have immigration questions or want help moving to Montenegro, feel free to contact me. I have been offering immigration services for 15 years and have one of the longest-standing records among Russian-speaking professionals in this area.
