Many Double Tax Treaties

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One of Montenegro’s biggest advantages and a strong pulling force for entrepreneurs around the world is the low tax rates for individuals and companies.  Individual income tax ranges from 9% to 11%, depending on the individual’s earnings, while the company income tax in Montenegro is set at a flat rate of 9% for foreigner and local businesses.

The tax rates in Montenegro are considered to be generous and low on a worldwide scale and they are particularly low for a European country.  Montenegro boasts one of the lowest tax rates in Europe because the government is making it easier to set up a company in Montenegro with additional perks to draw the attention of foreign investors.

Boasting about the low tax rate in Montenegro may be met with questions surrounding double tax treaties and whether or not the low tax rate in Montenegro is truly beneficial when you may be liable to pay tax in Montenegro and in your home country. 

A double tax treaty is a two-party tax treaty formed between two states which is established in order to avoid double taxation on the passive or active income of an individual or a company that generates an income outside of the country of residence.  If your home country has a double tax treaty with the country or state in which you set up and run your company, then you will only be required to pay tax in either one of these jurisdictions, not both.

Skepticism is not a negative attribute to have, especially when it is your time and money at stake.  Rest assured knowing that Montenegro does have double tax treaties with multiple countries and is always looking to expand its double tax agreements. 

Montenegro has 36 signed double tax treaties which are currently in effect:

  • Albania;
  • Belarus;
  • Belgium;
  • Bosnia and Herzegovina;
  • Bulgaria;
  • China;
  • Croatia;
  • Cyprus;
  • Czech Republic;
  • Denmark;
  • Egypt;
  • Finland;
  • France;
  • Germany;
  • Hungary;
  • Iran;
  • Italy;
  • Korea;
  • Kuwait;
  • Latonia;
  • Macedonia;
  • Malaysia;
  • Moldova;
  • Holland;
  • Norway;
  • Poland;
  • Romania;
  • Russia;
  • Slovakia;
  • Slovenia;
  • Sri Lanka;
  • Sweden;
  • Switzerland;
  • Turkey;
  • Ukraine;
  • The United Kingdom.

Montenegro has signed 44 double tax treaties in total.  36 have been confirmed and are in effect, however, six of the double tax treaties are still pending approval and implementation.  It is reassuring to know that Montenegro is constantly looking to expand its double tax treaties and should be expanding even further in the future.

Double tax treaties are critically important and should not be overlooked by foreign investors.  The income of the individual and company will be solely taxed in either Montenegro or your country of residence if it falls into the listed countries above.  Once the tax has been paid in one of the countries, the company or individual will not be required to pay it in the other country. 

In order to ensure that you can benefit from the double tax agreements that Montenegro holds with your home country, you will be required to provide sufficient evidence which proves your residency in your home country.  Usually, a certificate of residency from a tax authority that states that the company or individual is already paying tax in the other country will suffice. 

Individuals have attempted to use these advantageous tax agreements to commit tax fraud and evade tax altogether which is illegal in all countries and will have serious repercussions, therefore, it is important to comply with the rules and regulations which apply to double tax treaties in order to keep your tax activity transparent.  Ensure that your taxes are taken care of and everything is in order by hiring skilled accountants to deal with the legal side of company formation and double tax treaties.

Stevan. M

Stevan. M

Stevan is a Montenegro based writer and consultant

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