Montenegro: New transfer pricing rules

New definition of related parties, transfer pricing compliance guidelines

New definition of related parties, transfer pricing compliance guidelines

The Montenegrin Parliament approved a set of tax amendments that were published in the official gazette on 31 December 2021.

The amendments introduce a new set of transfer pricing rules that include a new definition of related parties, an extension of the list of methods used for assessment of prices in line with the arm’s length principle, and transfer pricing compliance guidelines.

Rules on interest deduction and taxation of interest income align with the arm’s length principle.

Transfer pricing compliance is dependent on taxpayer size and volume of related party transactions. New transfer pricing rules require the following compliance:

  • Large taxpayers classified in accordance with tax classification rules will be required to file transfer pricing documentation along with the corporate income tax return.
  • Other taxpayers (not having the status of a large taxpayer) are obliged to prepare transfer pricing documentation when preparing the annual corporate income tax return. Transfer pricing documentation is to be retained by the taxpayer and provided to the tax authority based on their request within a 45-day deadline.
  • Taxpayers that do not have the status of a large taxpayer may prepare transfer pricing documentation in abbreviated form if the transactions with related parties do not exceed €75,000 in the year for which the corporate income tax return is filed.

Taxpayers are obliged to prepare and (to the extent applicable) submit transfer pricing documentation up to 30 June of the current year for the previous year.

Bylaws for application of new transfer pricing rules are expected within one year from the start of application of the new rules.

Read a January 2022 report prepared by the KPMG member firm in Montenegro


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