Montenegro's 2025 Tax Amendments: New VAT Rates and Corporate Tax Reforms

October 18, 2024

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Montenegro is implementing new tax amendments starting in 2025, with major changes to VAT rates and taxable goods. A 15% VAT rate is being introduced for certain goods and services like books and hotel accommodations, while essential items like basic food, medicines, and medical devices will continue to be taxed at the reduced 7% rate.

In addition, the VAT zero rate that previously applied to large-scale projects in hospitality, energy, and food production will be removed, meaning companies in these sectors will now need to account for VAT. The changes are aimed at increasing tax revenues while maintaining lower rates for basic necessities.

There are also amendments to corporate and personal income tax laws, including new incentives for companies investing in agriculture and clearer rules on tax deductions for charitable activities. These reforms are designed to encourage investment in key industries and bring Montenegro’s tax system more in line with international standards.

For more details, you can read the full amendments in Montenegro’s Official Gazette:
Montenegro Official Gazette

What are the new VAT rates introduced in Montenegro effective January 1, 2025?

Montenegro has introduced a new reduced VAT rate of 15%, in addition to the existing 7% rate. The standard VAT rate of 21% remains unchanged.

Which goods and services are affected by the new 15% VAT rate?

The 15% VAT rate applies to accommodation services in hotels, motels, tourist resorts, guesthouses, camps, tourist apartments, and villas. It also applies to food and beverage services (excluding alcoholic beverages, carbonated and non-carbonated drinks with added sugar, and coffee) in hospitality facilities. Additionally, books and other specific goods and services previously taxed at 7% fall under this rate.

What items continue to be taxed at the 7% reduced VAT rate?

The 7% VAT rate continues to apply to essential goods and services such as basic food products, medicines, orthotic and prosthetic devices, medical devices surgically implanted into the body, textbooks, educational materials, drinking water (excluding bottled water), daily and periodic newspapers, public hygiene services, public passenger and luggage transport services, funeral services, animal food, fertilizers and plant protection products, seeds, planting materials, live animals, menstrual products, and baby diapers.

Has the zero VAT rate been abolished for certain sectors?

Yes, the zero VAT rate has been abolished for supplies of goods and services related to the construction and equipping of hospitality facilities with a category of five or more stars, energy facilities producing electricity with a capacity greater than 10 MW, and food production facilities with an investment value exceeding €500,000.

What changes have been made to VAT exemptions for low-value goods?

The VAT exemption for supplies of low-value goods worth up to €75 has been abolished. This means that all goods, regardless of their value, are now subject to VAT.

Are there any new incentives for specific industries under the 2025 tax amendments?

Yes, the amendments include new incentives for companies investing in agriculture and clearer rules on tax deductions for charitable activities. These reforms aim to encourage investment in key industries and align Montenegro’s tax system with international standards.

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