On 29th December 2021, Montenegrin Assembly passed a series of laws that are part of the Europe Now programme, which sets the strategy of Montenegro’s economy policy-achieving smart, sustainable and inclusive economic growth.
Series of laws that were changed in order to make programme Europe Now possible include: Labor Law, Law on Personal Income Tax, Law on Corporate Income Tax, Law on Value Added Tax, Law on Tax Administration, Law on Mandatory Social Security Contributions. Also, new laws were passed: Law on compulsory health insurance, Accounting Law. All changes and new laws are in effect from 1st January 2022.
Programme Europe now provides for the following main changes:
- Increase of the minimum wage from EUR 250.00 to EUR 450.00 in net amount;
- Reduction of costs for employers through lower tax burden on labor;
- Introduction of progressive taxation as a more efficient model of taxation;
- Introduction of the non-taxable part of the salary of EUR 700.00 on the gross basis (rate income tax of 0% on a gross basis of up to EUR 700.00);
- Introduction of an increased income tax rate of 15% on the gross base above EUR 1,000.00;
- Abolition of the obligation to pay contributions for compulsory health insurance.
The amounts of the tax rate on income from self-employment have also been changed, so that now the amount of taxable income from EUR 8,400.01 to EUR 12,000.00 is taxed at a rate of 9%, while the amount of taxable income is higher than EUR 12,000.00.
For all revenues generated from income from property, capital, capital gains, revenues from sports activities, copyrights and related rights, patents, the tax rate has been increased from 9% to 15%.
When it comes to income generated based on economic activity, liberal professions, professional services, service agreements, tax is paid at a rate of 9% for amounts up to EUR 12,000.00, while for amounts over EUR 12,000.00 tax rate is 15%.
In addition, non-resident natural persons will pay tax for income earned in Montenegro, unless they earn:
- income from performing activities electronically with an employer who does not perform activities in Montenegro; and
- earnings higher than three average gross earnings earned in the previous year in Montenegro, according to the data authority in charge of statistics.
The right to exemption from income tax is exercised by the beneficiary of incentive measures for the development of research and innovation, in accordance with the law governing incentive measures for the development of research and innovation.
In essence, with the programme Europe Now the tax burden on wages will be reduced from 39% to 20.4% for the lowest amounts of income, which are then progressively increased to a level of 31.3% for the highest amounts of net salaries of EUR 2,000.00 and up.
Europe Now also introduces progressive rates on the profit of legal entities amounting to 9%, 12% and 15%, mainly depending on the amount of taxable profit instead of the proportional corporate income tax rates of 9% that were applied so far.
Tax rates on the amount of taxable profit are:
- up to EUR 100,000.00 – 9%;
- from EUR 100,000.01 to EUR 1,500,000.00: EUR 9,000.00€ + 12% on the amount over EUR 100,000.01;
- over EUR 1,500,000.01: EUR 177,000.00€ + 15% on the amount over EUR 1,500,000.01.
In addition, deductible tax is increased from 9% to 15% based on gross income.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.