On 26 July 2017 the Parliament of Montenegro adopted the Law on Amendments to the VAT Law (hereinafter: the Law) published in the Official Gazette of Montenegro no. 50/2017 dated 31 July 2017.

An overview of the most significant changes is provided below.

Rate increase – applicable as of 1 January 2018

From 1 January 2018 the general VAT rate is increased from 19% to 21%.

Other amendments – applicable as of 8 August 2017

1. The rules on the place of supply of services are changing

Instead of the old rule based on which services were taxable in the place of service provider, irrespective of whether the service recipient is a VAT payer or not, the amendments of the Law introduce special rules for supplies to VAT payers in the sense of the VAT Law (so-called B2B – business to business supplies) and to entities that are not VAT payers (so-called B2C – business to consumer supplies):

1. If the supply of services is made to an entity that is a taxpayer (B2B), the place of supply of services is considered to be the place where the recipient of services has its headquarters/permanent establishment, or the place of permanent or temporary residence;
2. If the supply of services is made to an entity that is not a taxpayer (B2C), the place of supply of services is considered to be the place where the provider of services has its headquarters/permanent establishment, or the place of permanent or temporary residence.

A number of exceptions to the above said general rule is prescribed.

Therefore, when issuing invoices for supply of services during the tax period August 2017, it is necessary to divide supply of services performed from 1 to 7 August 2017 and supply of services performed from 8 August 2017 onwards, as applicable rules on the place of supply of services differ.

2. Parcels with insignificant value

Amendment to the VAT Law prescribes the value limit for importation of parcels that are exempt from import VAT in the amount of EUR 75.

Please feel free to contact us for any questions you might have on the adopted amendments of the VAT Law.

KPMG Tax & Legal Department

KPMG d.o.o. Podgorica
Svetlane Kane Radević 3
81000 Podgorica
Montenegro

Office: +382-20-201-480

tax@kpmg.rs