The employer is exempt from paying part of the salary tax withheld up to the amount of average monthly salary in Montenegro in a following manner:

• 90% of tax in 2021;
• 60% of tax in 2022;
• 30% of tax in 2023.

Exemption can be exercised for employees employed in the period from 1 January 2021 up to 31 December 2021 (inclusive) only and provided the following pre-conditions are met cumulatively:

• Employee registered with the National Employment Bureau for at least three months prior to the day of concluding the employment contract,
• Employer concluded an employment contract for an indefinite period,
• Entering into employment contract resulted in an increase in the number of employees that the employer had as at 31 December 2020,
• Employee was not employed by the shareholder or a related party to the employer before concluding the contract.

Right to exemption form payment of salary tax withheld by the employer is exercised based on request submitted to the Tax Authorities along with proof of fulfillment of the prescribed pre-conditions. The request form is prescribed in the Rulebook on the form of requests for exemption from payment of part of the personal income tax, which was published in the "Official Gazette of Montenegro", no. 061/21 as of 9 June 2021.

• 90% of PDI contributions in 2021;
• 60% of PDI contributions in 2022;
• 30% of PDI contributions in 2023.

The right to exemption of payment of part of the PDI contributions can be exercised for employees employed in the period from 1 January 2021 up to 31 December 2021 (inclusive) only and provided the pre-conditions for salary tax exemption are fulfilled.

For previous editions of KPMG Tax Alerts please visit the following web page:

KPMG Tax Alerts

KPMG Tax & Legal Department

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

T: +382 20 20 1480

tax@kpmg.rs

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