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Tax Reform in Montenegro

Tax Reform in Montenegro

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In “Official Gazette of Montenegro” no. 145/21 and no. 146/21 on 31, December 2021, amendments of the series of laws were published, including Law on Tax Administration, Law on Personal Income Tax, Law on Corporate Income Tax, Law on Contributions for Compulsory Social Insurance, Law on Compulsory Health Insurance, Labor Law, Law on Companies.

The aim of these laws amendment is implementation of the Montenegrin Government Economic Plan “Europe Now”.

Significant improvement of the business environment has been made through abolition of the obligation to pay contributions for compulsory health insurance and introduction of non-taxable part of the salary.

Non-taxable part of salary (up to EUR 700) has been introduced by the amendment of Law on Personal Income Tax in order to reduce the tax burden while also implementing the dual taxation system depending on the source of income.

With these changes, Montenegro becomes the state with the highest level of non-taxable part of the salary in the region, while retaining a  low rate of income tax on the amount of earnings exceeding the amount of 700.00€.

Also, in order to stimulate development of innovation, non-resident persons who perform activities electronically with an employer who doesn’t perform activities in Montenegro are exempt from income tax.

With amendments on the Law on Corporate Income Tax, Montenegrin legislation was harmonised with EU directives. A progressive corporate tax rate has been introduced while Montenegro kept its competitive position.

Amendments on the Law on Companies will prevent of launching of court liquidation on official duty for those business entities who have failed to harmonise the organization with the Law and to register changes before deadline defined by the Law.

There are expectations that these regulation changes will support the increase the living standards of all citizens, improve the business and investment environment and reduce the grey economy in the labour market.

By Daniel Vujacic, Associate, Vujacic