Montenegro has been accused of being a tax haven jurisdiction because of the multiple tax benefits that it offers to foreign investors. From low personal income tax to low corporate income tax, the possibility of reducing VAT to nil and tax exemption on foreign-earned income, one can understand why Montenegro may have come under scrutiny. However, Montenegro has never been and will never be a tax haven country. When one takes a closer look at Montenegro, it is evident that it is not on the same level as tax haven jurisdictions such as BVI, Singapore, or the Isle of Man.
In this article, we will take a closer look at a summary of all of the tax benefits offered to foreign investors in Montenegro.
Personal Income Tax Benefits:
Personal income tax rates in Montenegro range between 9% to 11% depending on the earnings of the individual.
- Individuals who earn below €750 per month are subject to a 9% income tax rate;
- Individuals who earn more than €750 per month are subject to an 11% income tax rate;
Considering that the average personal income tax rate in Europe is an astounding 25% to 67%, depending on the region, Montenegro’s personal income tax rate is remarkably low.
Corporate income tax rates are more straight forward in Montenegro.
Every company, whether foreign-owned or locally-owned, is subject to a flat corporate income tax rate of 9%. To put that into perspective, the average corporate income tax rate in Europe is 22.5% (higher than the global average of 21.4%)
VAT rates in Montenegro meet the European average of 21% VAT.
- Individuals or companies that generate less than €18 000 profit per year are not required to register to pay VAT in Montenegro;
- Individuals or companies that generate more than €18 000 profit per year are required to register as a VAT payer with the tax authorities in Montenegro.
There are goods and services that one can provide that will reduce the VAT rates to 7% or 0% (VAT exemption).
7% VAT is applicable to the following goods and services:
- Basic products for human consumption such as milk, bread, sugar and others in the food industry;
- Medicines such as medication and tools required for medical practice. Veterinary medicine, prosthetic and orthotic tools also fall under this category;
- Teaching aids such as textbooks and books;
- Housing and accommodation services;
- Potable water, not including bottled water;
- Transportation services which include transporting people and luggage items;
- Funeral services;
- Non-profit sports facility services;
- Agricultural breeding materials, plant protection, and planting related services;
- Public hygiene-related services;
- Copyright services.
0% VAT rates are applicable to the following goods and services:
- Banking and financial services;
- Insurance services;
- Education services;
- Religious services;
- Services related to public radio broadcasting;
- Social security services;
- Supply of gold and precious metals to the Bank of Montenegro;
- Health services;
- Public postal services;
- Services of leasing and subletting accommodation for a period longer than 60 days;
- Games of chance and games for entertainment.
Finally, and possibly one of the most interesting and beneficial tax advantages of Montenegro is the fact that non-residents will not be taxed in Montenegro for earnings that come from a source outside of Montenegro.
Residents of Montenegro are required to pay tax on all worldwide earnings, whereas, non-residents are only required to pay tax on earnings generated from inside Montenegro.
In short, foreign investors who do not elect to become residents of Montenegro can enjoy the benefits of tax-free income and keep more of their hard-earned income.
Montenegro will not eliminate tax rates entirely, however, the government of Montenegro has given foreign investors the opportunity to legally lower tax rates and cut their spending on tax significantly while enjoying the other benefits that Montenegro has to offer – and all of these advantages come from a country that is not an offshore jurisdiction. If your country has signed a double tax treaty with Montenegro, then these benefits provide you with even more of an advantage.
If you are searching for a way to legally reduce your tax rates while maintaining 100% ownership of your company that you can form remotely with only one shareholder and one director, then look no further than Montenegro.