Bojana Peric, Ivan Petrovic
In the last year, the Montenegrin government has introduced important amendments to the VAT Act, some of which have been triggered by the recent NATO accession. A larger amendment looms in 2018, write Bojana Peric and Ivan Petrovic of Eurofast Global.
Specifically, Article 17, paragraph 3 of the VAT Act has been supplemented with a new point, 9, which is related to "provision of access to a natural gas and electricity transmission system". According to this point, the place of the service provider's seat is considered to be the place of the performed supply of these services. If the recipient of the service is resident abroad, the supply shall be deemed to be the recipient's place of residence.
In Article 24a, paragraph 1, a supplementing point 16 was introduced related to the provision of food, beverage and beverage services in hotels with at least four stars in the north region, or with at least five stars in the central and coastal regions. This supply will become subject to the reduced VAT rate of 7%. This provision shall apply From January 1, 2018.
The process of Montenegro's accession to NATO has reached the final step in process of application for membership in the organisation. A formal invitation was issued by the alliance on December 2 2015 and accession negotiations concluded with the signature of an accession protocol in May 2016. Montenegro officially joined NATO on June 5 2017.
As a result, Article 28 of the VAT Act was supplemented with a new point 13, which exempts from VAT the import of goods carried out by the armed forces of the states which are members of NATO for the needs of those forces or accompanying civilian personnel, as well as for the supply of their canteens. This provision applies as of July 5 2017, 30 days from the date of Montenegro's accession to NATO.
However, the above VAT amendments may seem minimal when compared to the much more important VAT change coming up in 2018. As of January 1 2018, the Montenegrin VAT rate will be increased from the current 19% to 21%. The Montenegrin Ministry of Finance has announced that the increase is aligned with the fiscal strategy of the ministry which will also include an increase in the excise duties on a number of products. The reduced VAT rate of 7% will remain unchanged.
Ernst & Young Montenegro d.o.o.
Serdara Jola Piletica bb
PC Palada, II floor
Tel: +382 20 238 477
Central Cluster Leader
Tel: +36 1 451 8602
Country Tax Leader
Tel: +381 11 2095 794
|Corporate Income Tax||9%|
|Capital Gains Tax||9%||A|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||9%||C|
|Branch Remittance Tax||0%||N/A|
A) Capital gains are included in a taxpayer's total income and taxed at 9%.
B) The withholding tax rates may be reduced if a favourable double tax treaty exists (DTT).
C) The withholding tax rate paid to non-residents, unless the rate is reduced by the DTT.