VAT Exemptions

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Montenegro’s seemingly unending list of benefits for foreign investors who are looking to form a company in Montenegro just got longer.  The Montenegrin government has added VAT exemption to this list and we will be taking a closer look at the types of business activities that qualify your company to get the most out of this advantage.

Most countries apply VAT to sales, imported goods, and exported goods.  Montenegro has VAT rates which are applicable to sales and imported goods, however, there is no VAT applied to exports.  Income which is received from financial services and investment income are also exempt from VAT.  This is already an advantage for all potential entrepreneurs regardless of the type of business activity of his/her company.

The VAT is calculated as a percentage of the value of the item which is sold.  In Montenegro, the standard VAT rate is 19%.  All individuals and companies that are involved in activities such as manufacturing, trading, or providing a service are liable to pay VAT. 

In order to pay VAT, individuals and companies must register with the tax authorities, however not all companies and individuals are required to complete VAT registration.  Companies and individuals that generate a profit of over €18 000 per year are required to complete VAT registration, however, companies that generate less than €18 000 profit per year are not required to complete VAT registration.

The first thing that you will be required to do, as a VAT taxpayer in Montenegro, is to register with the local tax authorities and acquire a VAT number. 

Montenegrin law stipulates that most goods and services are subject to 19% VAT rates, but not all.  There are some instances where VAT can be reduced to as low as 7% and other goods and services which fall into the 0% VAT bracket.

7% VAT is applicable to goods and services which fall under the following categories:

  • 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.

A 7% VAT rate is already considerably low, however, if your company provides goods and services to the public that fall within the following list, then you will be able to enjoy a VAT reduction to 0% VAT:

  • 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.

The above lists are summaries of the goods and services which benefit from 7% and 0% VAT rates.  Further research into the specific details and the legislation governing the VAT rates of these goods and services will be required to see if your company offers goods and services which fall into these categories.  You can hire a professional team of accountants to help guide you in this regard.

The government of Montenegro is strongly encouraging foreign investment and has intentionally implemented favorable VAT rates so that you, as a foreign investor, can benefit. 

 

Stevan. M

Stevan. M

Stevan is a Montenegro based writer and consultant

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