§ Legislation

• Law on Personal Income Tax ("Official Gazette of the Republic of Montenegro", No. 065/01 dated 31.12.2001, 012/02 dated 15.03.2002, 037/04 dated 04.06.2004, 029/05 dated 09.05.2005, 078/06 dated 22.12.2006, 004/07 dated 24.01.2007, “Official Gazette of Montenegro", No. 086/09 dated 25.12.2009, 073/10 dated 10.12.2010, 040/11 dated 08.08.2011, 014/12 dated 07.03.2012, 006/13 dated 31.01.2013, 062/13 dated 31.12.2013, 060/14 dated 31.12.2014, 079/15 dated 31.12.2015, 083/16 dated 31.12.2016)
• Decree on the manner for conversion of current net salaries into gross salaries (“Official Gazette of the Republic of Montenegro", No. 034/02 dated 08.07.2002)
• Rules on calculation of gross salaries (“Official Gazette of Montenegro", No. 005/11 dated 21.01.2011)
• Rules on the form and content of annual return for calculation and payment of personal income tax (“Official Gazette of Montenegro", No. 016/08 dated 07.03.2008, 021/09 dated 20.03.2009, 018/11 dated 01.04.2011, 023/12 dated 27.04.2012, 017/13 dated 05.04.2013, 020/14 dated 25.04.2014, 017/15 dated 17.04.2015, 029/16 dated 06.05.2016)
• Rules on classification of fixed assets according to groups and methods for determination of depreciation for taxpayers generating income from private sector activities (“Official Gazette of RoM”, no. 58/02)
• Rules on lump sum taxation of income from private sector activities (“Official Gazette of the Republic of Montenegro", No. 003/05 dated 24.01.2005, (“Official Gazette of Montenegro", No. 080/08 dated 26.12.2008, 018/12 dated 30.03.2012, 012/14 dated 07.03.2014, 018/14 dated 11.04.2014, 025/16 dated 15.04.2016)
• Instruction on the manner of calculation and payment of taxes and contributions from and on personal income in respect of employment ("Official Gazette of the Republic of Montenegro", No. 081/06 dated 29.12.2006, "Official Gazette of the Republic of Montenegro, No.045/08 dated 31.07.2008, 004/10 dated 22.01.2010, 008/13 dated 07.02.2013, 002/15 dated 16.01.2015, 009/15 dated 05.03.2015, 009/16 dated 11.02.2016, 010/17 dated 08.02.2017)

Taxpayer

A taxpayer of the income tax shall be a resident or non-resident natural person who generates income from sources stipulated by the law.

A resident natural person shall be a natural person who:

• Has habitual residence or centre of business and vital interests in the territory of Montenegro;
• Resides in the territory of Montenegro for more than 183 days in the tax year.

The resident of Montenegro shall also be a natural person who was assigned outside of Montenegro to conduct business for a natural person or legal entity who is a resident of Montenegro, or for an international organization.

Object of taxation

Object of taxation of a resident shall be the income the resident generates in Montenegro and outside Montenegro.

Object of taxation of a non-resident natural person (hereinafter referred to as the non-resident) shall be the income that the non-resident generates in Montenegro.

Income shall not include revenues generated on the following basis:

• regulations on rights of disabled persons;
• child allowances and special assistance for supplies for newborn children;
• basic rights in the area of social protection;
• assistance in the event of destruction or damage of property as a result of natural disasters or other extraordinary events;
• compensations paid from health insurance, except for wage compensation;
• inheritances and gifts;
• organized social and humanitarian assistance;
• state awards established by law;
• pensions, except for pensions obtained in accordance with the law governing the wages of the state and public officials, and disability allowances;
• lotteries and games of chance;
• goods, life, and property insurance.

Revenues exempt from income

Income shall not include revenues generated on the following basis:

• regulations on rights of disabled persons;
• allowances for children and special assistance for supplies for newborn babies;
• basic rights in the area of social protection;
• assistance in the event of destruction or damage of property as a result of natural disasters or other extraordinary events;
• compensations paid from health insurance, except for wage compensation;
• inheritances and gifts;
• organized social and humanitarian assistance;
• state awards stipulated by law;
• pensions, except for pensions obtained in accordance with the law governing the wages of
• the state and public officials, and disability allowances;
• games of chance and lotteries;
• goods, life, and property insurance.

Earnings not subject to taxation

The income tax shall not be paid on earnings generated in respect of:

• Per diem for official travel abroad up to the amount stipulated for users of the State Budget;
• Allowances for increased cost of field work and visits (field work allowance), up to the amount of €100 a month, in case accommodation and meals are not provided for;
• Family separation allowances up to €100 per month;
• Sympathy assistance in case of death of an employee, member of his/her immediate family, and retired worker up to €1,500;
• Sympathy assistance in case of a serious illness, healthcare rehabilitation, procurement of medicaments, and health treatment of an employee or member of his/her immediate family up to €1,000;
• Severance payment in case of retirement up to €1,000;
• Severance payment in case of termination of employment in case of redundancy up to minimum amount determined by the law governing labor relations;
• Scholarship and loans to pupils and students up to €200 a month;
• Awards to pupils and students for the achieved results during education, as well as awards received in competitions within the educational system;
• Tuitions or other documented expense for the education of an employee in case that the education and vocational training is related to the field of activity of the employer;
• Allowances for meals – subsistence allowance paid to the amateur sportsmen by sport clubs up to €300 a month;
• Allowance during the unemployment paid by the extra-budgetary funds;
• Damage compensation resulting from consequences of accidents at work place according to the decision of the court or court settlement if the compensation is set as a lump sum amount;
• Trade union welfare assistance paid out from the trade union membership fee funds to union members;
• Gifts to children of an employee, up to 15 years of age, annually up to €50 per child;
• Jubilee awards for: 10 years of work up to €100; 20 years of work up to €200; 30 years of work up to €300; 40 years of work up to €400.

Persons exempt from taxation

The following persons shall not pay the income tax:

• members of foreign diplomatic missions in Montenegro, and members of their households, if they are not citizens of Montenegro;
• members of consular representative offices, as well as members of their households, if they are not citizens of Montenegro;
• officials and experts of technical assistance programs of the United Nations Organization and its specialized agencies;
• honorary consuls of foreign countries, but only for earnings received by a country, which has appointed them to render the honorary consul service;
• officials, experts, and administrative staff of international organizations if they are not citizens of Montenegro or do not have habitual residence if Montenegro.

Tax period

Tax period for which the income tax shall be calculated shall be a calendar year, with the exemption of cases when a business activity terminates or commences during the year.

The income tax shall be calculated upon the expiry of the calendar year or other period for tax assessment according to the tax base realized during that period.

Tax base

A tax base for the income tax of a resident shall represent the taxable income of the taxpayer generated during the tax period, reduced by the amount of loss carried forward.

A tax base for the income tax of a non-resident shall represent the taxable income of the taxpayer generated during the tax period.

Tax rate

Tax rate of the income tax shall be 9% of the tax base.

Sources of income

The income tax shall be paid on revenues from all sources except those that are exempt under the law.

Sources of revenues shall include revenues generated in respect of:

• personal earnings;
• self-employment activity;
• property and property-based rights;
• capital;
• capital gains.

Income shall represent the sum of taxable revenues generated in the tax period.

Calculation and payment of the income tax in the tax return

 The income tax shall be calculated annually.

The taxpayer himself shall calculate the income tax in the tax return.

Taxpayer of the income tax shall be obliged, upon the expiration of the tax period, to file a tax return to the competent tax authority.

The tax return shall be filed at the end of April of the current year for the previous year.

A resident who generates income from the following sources shall be obliged to file the tax return:

• self-employment activity chargeable to tax for actual revenue;
• property and property-based rights;
• capital gains;
• abroad.

Advance payment of taxes on revenues

During the year, a taxpayer shall pay the tax on revenue from a self-employment activity in the form of monthly advance installments, the amount of which is determined based on the amount of the income tax from the self-employment activity as set in the tax return for the previous year.

Obligor of taxes on revenues from self-employment activities whose total turnover for the year that precedes the year for which the tax is assessed or whose planned turnover in cases of commencement of the activity is less than EUR 18,000 may be allowed, at his request, to pay the tax in an annual lump sum amount.

Advance payment of tax on revenues from property and property rights during the year, shall be calculated, withheld, and paid by the payer of revenue (legal entity or entrepreneur), at the event of each collection of revenue, and at the same time with collection, by applying a rate of 9% to the taxable revenue.

The payer of revenues from capital shall be obliged to calculate, withhold, and pay the tax on revenues from capital at the same time with the payment of revenue.

Double taxation avoidance

To a resident taxpayer, who generates income outside of Montenegro and pays an income tax in another country, the tax credit in the amount equal to the income tax paid in such country shall be approved.

Agreement on double taxation avoidance shall supersede the provisions of the national law.