Montenegro country profile - 2020
Montenegro country profile - 2020
Key tax factors for efficient cross-border business and investment involving Montenegro.
- EU Member State
- Double Tax Treaties
- Most important forms of doing business
- Legal entity capital requirements
- Residence and tax system
- Compliance requirements for CIT purposes
- Corporate income tax rate
- Withholding tax rates
- Holding rules
- Tax losses
- Tax consolidation rules/Group relief rules
- Registration duties
- Transfer duties
- Controlled Foreign Company rules
- Transfer pricing rules
- Thin capitalization rules
- General Anti-Avoidance rules (GAAR)
- Specific Anti-Avoidance rules/Anti Treaty Shopping Provisions / Anti-Hybrid rules
- Advance Ruling system
- IP / R&D incentives
- Other incentives
- VAT
- Other relevant points of attention
- Contact us
Double Tax Treaties
With the following countries, territories and jurisdictions:
Albania | Denmark | North Macedonia | Slovenia |
Austria | Egypt | Malaysia | Sri Lanka |
Azerbaijan | Finland | Malta | Sweden |
Belarus | France | Moldova | Switzerland |
Belgium | Germany | Netherlands | Turkey |
Bosnia & Herzegovina | Hungary | Norway | UAE |
Bulgaria | Ireland | Poland | UK |
China | Italy | Romania | Ukraine |
Croatia | Rep. of Korea | Russia | Portugal |
Cyprus | Kuwait | Serbia | Iran |
Czech Rep. | Latvia | Slovakia |
Most important forms of doing business
Legal entity capital requirements
Residence and tax system
Compliance requirements for CIT purposes
The taxpayer is obliged to file a CIT return no later than 3 months after the end of the financial (calendar) year for which the tax is calculated (i.e. no later than the end of March for the previous year). Payment of CIT as per the tax return is also due by the same deadline. An income statement and balance sheet are submitted to the tax authorities along with the CIT return.
On interest paid to non-resident companies
9 percent.
On patent royalties and certain copyright royalties paid to non-resident companies
9 percent.
On fees for technical services
Yes, consulting, market research and audit service fees are subject to WHT.
On other payments
Withholding tax of 9 percent on the following payments to non-resident entities: lease fees for movable and immovable property, entertainment, musical, artistic and sports fees. In addition, 9 percent withholding tax on fees paid by Montenegrin resident companies to individuals for purchase of used products, semi-products and agricultural products.
Branch withholding taxes
Yes, for payments subject to WHT, except for dividend payments.
Holding rules
Dividend received from resident/non-resident subsidiaries
Dividends received from Montenegrin tax residents (domestic dividends) are subject to a final WHT, but excluded from the tax base of the parent company.
Dividends received from non-Montenegrin companies (inbound dividends) are taxable; a credit for WHT paid abroad is available, subject to the parent company holding directly or indirectly 10 percent or more of the shares of the non-resident company for at least one year preceding the submission of the tax balance. Non-utilized tax credits can be carried forward for a maximum of five years.
Capital gains obtained from resident/non-resident subsidiaries
Capital gains realized in Montenegro by non-resident companies are subject to a 9 percent capital gains tax.
Capital gains realized by a resident company (arising from disposal of a resident/non-resident subsidiary) are subject to 9 percent corporate income tax.
Tax losses
Losses (excluding capital losses) generated from business, financial, and non-business transactions may be carried forward over the five subsequent tax periods and offset against future taxable income. Losses that were carried forward are not forfeited due to mergers, acquisitions, spin-offs, and other reorganization changes.
Capital losses may be carried forward for five years and utilized only against capital gains.
Carry-backs are not allowed.
Tax consolidation rules/Group relief rules
Yes, Montenegrin resident companies may opt for group consolidation. The parent company and its affiliates can constitute a group of associated companies, if at least 75 percent of the shares of the affiliates are held, either directly or indirectly, by the parent company. Once approved, tax consolidation must be applied for at least five years.
On the transfer of land and buildings
Real estate transfer tax at the rate of 3 percent is payable on the transfer of land, as well as on the second and subsequent transfer of new buildings. The first transfer of a new building is subject to VAT at the rate of 21 percent.
Stamp duties
No.
Real estate taxes
In general, the tax rate ranges from 0.25 percent to 1 percent applied to the market value of real-estate. The general rate is subject to change, depending on the specific type of real estate and its intended use.
Transfer pricing rules
General transfer pricing rules
Taxpayers are required to separately disclose transactions between related parties in their tax balances and the value of such transactions at arm's length prices. The difference between the arm's length price and the transfer price used by the taxpayers is included in the tax base. The Montenegrin legislator approved the following three methods for determining the arm’s length price: comparable uncontrolled price method, cost plus method and resale price method.
Documentation requirement
Guidelines regarding the determination of the transfer price and documentation required in the case of a transfer pricing audit by tax authorities, currently do not exist in Montenegro.
Specific Anti-Avoidance rules/Anti Treaty Shopping Provisions/Anti-Hybrid rules
Other incentives
- A tax holiday is provided for newly established entities and newly established organizational units performing business activities in underdeveloped regions of Montenegro during the first 8 years of operation. The tax holiday cannot exceed EUR 200,000 for the entire 8-year period.
- 6 percent CIT discount if the CIT liability is promptly settled
Other relevant points of attention
Mandatory Disclosure Rules Updates
For country specific information and updates on the EU Mandatory Disclosure Rules please visit KPMG’s EU Tax Centre’s MDR Updates page.