Montenegro is a vibrant and competitive country committed to fostering a sustainable tourism portfolio while preserving its natural resources. In recent years, the country has experienced remarkable economic growth, driven by the adoption of the Euro as its official currency and substantial investments in key sectors such as tourism, energy, water, and transportation infrastructure.
The Ministry of Economic Development and Tourism in 2022 updated the Investment Incentives Inventory featuring a total of 51 investment incentives. These incentives cover diverse areas, including financial and non-financial aspects, along with fiscal incentives. Incentives affect taxes, customs, excise taxes, fees, agriculture, science, tourism, services, construction, sustainable and economic development subsidies, as well as incentives in the fields of renewable and hybrid energy.
Individuals and Corporate Tax Incentives
Self-employed individuals who start their business in underdeveloped areas in Montenegro, are eligible for an 8-year tax exemption of up to EUR 200.000. However, this incentive does not apply to sectors like agriculture, transportation, shipbuilding, fishing, and steel production.
NGOs who participate in economic operations could reduce their corporate tax base by EUR 4000, provided the profits are used to promote their primary objectives. Additionally, resident taxpayers, have the right to a foreign tax credit, which equals the company tax paid abroad, but it can never exceed the tax that would have been paid in Montenegro.
Incentives in the Tourism Industry
Some of the incentives that the Montenegro Government has implemented in the tourism industry include:
- Zero VAT policy – for the construction and equipping of five-star or higher catering facilities, energy facilities producing over 10 MW of electricity, and food production facilities with an investment value exceeding EUR 500,000, as per the Value Added Tax Law.
- Tax relief options under the Real Estate Tax Law allow for reduced tax rates on catering facilities based on star categories: up to 15% for 3-star, up to 30% for 4-star, and up to 70% for facilities with more than 4 stars. After paying corporate income tax, Montenegro-based businesses can transfer funds abroad at the year-end.
- A reduced VAT rate of 7% – applies to various services, including accommodation in hotels, food preparation and service in catering facilities (excluding certain beverages), and public transport for passengers and their luggage.
Furthermore, premium hotels are exempt from utility fee payments. Additionally, for the construction of four-star or higher hotels, investors are not required to pay fees for communal equipment of construction land under the Spatial Planning and Construction Law, unless operating under specific business models.
If you are considering to invest in Montenegro, we suggest prior consulting with a tax and legal professional can be beneficial in navigating the details. Our firm specializes in international taxation, and our team is ready to assist with any related matters. If needed, we can connect you with top professionals to support your business activities in Montenegro. Please feel free to contact us.
