Montenegro: Direct and indirect tax amendments enacted

The Parliament in September 2024 enacted the following amendments to the tax laws effective January 1, 2025:

• Legal entities that reinvest profits in agricultural projects may be entitled to a corporate income tax credit for the invested amounts (up to €300,000 over three years) by submitting a request to the tax authority.
• More precise definitions are provided for expenses related to health, social, educational, scientific, religious, cultural, sports, humanitarian purposes, and environmental protection, which are recognized as deductible expenses up to a maximum of 3.5% of total revenues (and up to a maximum of 5% of total revenues for expenses for national sports associations).

• Income from gaming and gambling is now subject to 15% individual (personal) income tax.

• New reduced VAT rate of 15% is introduced and will apply to books, monographic and serial publications, accommodation services in hotels, motels, tourist resorts, guesthouses, camps, tourist apartments, and villas, food and beverage services (excluding alcoholic beverages, carbonated and non-carbonated drinks with added sugar, and coffee) in hospitality service facilities, copyright services in education, literature, and art, scientific and artistic copyright, services charged via entry tickets (except those exempt from VAT), non-profit use of sports facilities, marina services, solar panels, and hairdressing services.
• Existing reduced VAT rate of 7% will not apply to basic food products, medicines, orthotic and prosthetic devices, as well as medical devices surgically implanted into the body, textbooks and educational materials, drinking water (excluding bottled water), daily and periodic newspapers, public hygiene services, public passenger and their personal luggage transport services, funeral services, animal food, fertilizers and plant protection products, seeds, planting materials and live animals, menstrual products, and baby diapers.
• Zero VAT rate for supply 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with a capacity greater than 10 MW, and food production facilities with an investment value exceeding €500,000 is repealed.
• The exemption from VAT on low-value shipments of up to €75 is repealed.
• The amount of lump-sum compensation that farmers receive based on the supply of agricultural and forestry products or services is increased from 5% to 8%.

Read an October 2024 report prepared by the KPMG member firm in Montenegro