Montenegro’s tax rates are fair and equal for everyone, local or foreign. All individuals, whether foreign or local, are required to pay the same percentage of personal income tax which ranges from 9% to 11% depending on personal earnings and all companies pay the same company income tax of 9% regardless of whether or not the business owners have Montenegrin residency.
Montenegro has an equal-for-all and transparent tax system which most would agree is fair and it certainly makes trading and doing business in Montenegro a pleasant experience. It is obvious that the government of Montenegro considers low tax rates to be a pulling force for foreign investment – and they are not wrong.
Montenegro’s favorable tax rates extend beyond the beneficial income tax rates into the advantageous VAT rates offered by the country. Montenegro offers 19% VAT rates on most goods and services while allowing for a tax reduction to a 7% VAT rate on some specified goods and services and a further VAT reduction to a 0% VAT rate on other specified goods and services. In general, the lower VAT rates are applicable to goods and services which are deemed necessary for the public.
But the government of Montenegro did not stop here. It has continued to expand the favorable tax rates to include instances where foreign individuals and foreign business owners can benefit from tax-free income.
Montenegro offers tax-free income for foreign business owners but there is a catch. The tax-free benefit is only applicable to all income earned outside of Montenegro. All money earned in Montenegro will be subject to the standard tax rates. There are a few terms and conditions which will determine whether or not the foreign investor is eligible for this advantage, however, the list of requirements is short and sweet.
In order to qualify for tax-free income in Montenegro, one must earn all of this income outside of the country and the person who is receiving income in Montenegro cannot be a resident of Montenegro. Once you have acquired Montenegrin residency, this tax perk will fall away and you will be required to pay tax on all income, regardless of where it comes from.
It would appear that in terms of the tax rates in Montenegro, it is more beneficial to remain a foreigner who does not hold Montenegrin residency because you will still reap the benefits of the low-income tax rates and the low VAT rates while your foreign income remains tax-free.
However, there are other benefits to gaining Montenegrin residency such as having the opportunity to gain citizenship in a country that is politically sound with a booming economy. Montenegro is also on its way to achieving accession to the EU which means that you will benefit from all of the advantages that the EU has to offer.
As the saying goes, the only things certain in life are death and taxes. Unfortunately, the government of Montenegro has not been able to come up with a solution for death as yet, but it’s proving to have a positive impact on the negative aspects associated with paying taxes.
It is important to keep in mind that Montenegro is not a tax haven country and these benefits are rarely found in other jurisdictions which are not tax haven jurisdictions.