Countries in the region continue with the application of the Pillar 2 of OECD’s Global Anti-Base Erosion Model Rules (“GloBE”) as well as the EU’s Global Minimum Tax Directive 2022/2523. After the introduction of GLoBE rules in Slovenia, Croatia and North Macedonia, the Ministry of Finance of Montenegro, on 26 November, initiated the public consultations regarding the new Law on Global Minimum Corporate Income Tax (“Law on GMCIT”).
Amendments and Supplements to the VAT Law (“the Laws”) are also proposed by the ministry.
The consultation will last for 20 days, and GMCIT is expected to apply as of 1 January 2026.
In addition, Montenegro is expected to introduce a law confirming the Convention between Montenegro and the Principality of Liechtenstein for the elimination of double taxation with respect to taxes on income and on capital and the prevention of tax evasion and avoidance.
Below is a short overview of the main provisions of the proposed laws and the treaty.
Law on Global Minimum Corporate Income Tax
- What is GMCIT?
The GMCIT is a qualified domestic top-up tax (QDMTT) which was introduced under Pillar 2 rules. The main purpose of the top-up corporate income tax is to set a minimum effective taxation of the multinational enterprise groups and large-scale domestic groups operating in Montenegro.
Concepts of the Income Inclusion Rule (IIR) and Under-Taxed Profits Rule (UTPR) are not introduced by the law.
- Application of the GMCIT?
GMCIT applies to constituent entities which are members of multinational enterprises and large-scale domestic groups.
The tax is payable by groups whose annual revenue amounts to EUR 750,000,000 or more in at least two of the four fiscal years immediately preceding the tested fiscal year. The revenue is calculated according to the ultimate parent entity’s consolidated financial statements.
According to the de minimis rule, the Montenegrin GMCIT is not payable if the average revenues of constituent entities are lower than EUR 10,000,000 and total profit is below EUR 1,000,000.
If the jurisdictional effective tax rate falls below 15%, Montenegro will levy a domestic top-up tax so that foreign jurisdictions cannot apply their own top-up rules (IIR or UTPR) to the same revenue.
- Calculation of the effective tax rate and top-up tax?
The GMCIT calculation is based on determining the jurisdictional income or loss of each entity derived from financial accounting net income, with all adjustments required and adjusted according to the Law on GMCIT. It is also important to identify the amount of covered taxes attributed to that income. Using these elements, the jurisdictional effective tax rate is calculated. If the effective tax rate is below 15 per cent, the difference in tax rates represents the top-up tax percentage applied to the GloBE income. The resulting amount constitutes the domestic top-up tax for Montenegro.
- Administrative guidance?
The GMCIT prescribes that a top-up tax return should be filed with the tax administration electronically, along with the prescribed information about the multinational enterprises and large-scale domestic groups, no later than 18 months after the last day of the reporting fiscal year. Forms of the tax return, other data which will need to be submitted to the tax administration and the procedure will be stipulated by the upcoming by-laws.
Amendments and Supplements to the VAT Law
These Amendments aim to further align the Montenegrin VAT framework with EU legislation, specifically with Directive 2006/112/EC.
The following text reflects on some of the most significant proposed changes.
- Sale of Construction Land
According to the amendments, the sale of construction land is considered a supply of goods which is subject to VAT. The construction land is defined as land for which a construction permit has been issued in accordance with the applicable law on building construction. Construction land on which a building has been constructed is treated as an integral part of the total supply of the newly constructed building.
- Place of Supply of Services
New rules in taxation are provided for services of accessing events over the internet, which are taxable in the place of the recipient of services when provided to non-taxable persons. Data processing services and provision of information, including business information and know-how, when provided to non-taxable persons, will be taxable in the place of service provider.
Other rules on the place of supply of services are provided in a clearer manner as they are divided into more articles now.
- Registration of Foreign Taxpayers
The obligation of foreign taxpayers to register for VAT in Montenegro is now clarified. Foreign service providers must establish a permanent establishment or appoint a VAT representative in Montenegro when providing services to non-taxable persons with a place of supply in Montenegro (e.g. electronically provided services). Failure to comply with this obligation may result in penalties ranging from 3,000 EUR to 10,000 EUR for a legal entity, 1,000 EUR to 4,000 EUR for entrepreneurs, and 800 EUR to 2,000 EUR for the responsible individuals.
- General VAT Registration and Invoicing
In order to align with the practices of the European Union (“EU”), Montenegro plans to introduce a VAT number consistent with the EU system. A new VAT registration number will be created by adding the prefix “ME” to the existing Tax Identification Number (“TIN”). Allowing identification and simplifying the recognition of Montenegrin taxpayers in future EU information exchange systems. The new VAT number is scheduled to be introduced on 1 January 2026.
VAT invoices will have to contain the clause that reverse charge will be applied if the place of supply of service is outside of Montenegro, and in case of sale of gas, electric energy and heating and cooling energy to a person that is not a final consumer.
The amendments and supplements are set to take effect on the eighth day after their publication in the Official Gazette.
Treaty with the Principality of Liechtenstein
On 25 September 2025, Montenegro and the Principality of Liechtenstein signed the Convention between Montenegro and the Principality of Liechtenstein for the elimination of double taxation with respect to taxes on income and on capital and the prevention of tax evasion and avoidance (“DTT”).
DTT aims primarily to eliminate double taxation on income and property, prevent tax evasion and avoidance. Given the growing risk of tax evasion in modern business environments, the treaty also establishes a clear legal framework for international cooperation and information exchange between both tax administrations.
Some of the key agreed tax rates under DTT are:
- dividends: 5% if the beneficial owner is a company (other than a partnership) which holds directly or indirectly at least 10 per cent of the capital of the company paying the dividends, or 10% in all other cases,
- interest: 5%, and
- royalties: 5%.
From the date of accession of Montenegro to the European Union, dividends will be subject to tax only in the country of residence of the recipient, if the recipient holds directly or indirectly at least 10 per cent of the capital of the company paying the dividends throughout an uninterrupted period of at least 2 years.
The DTT will enter into force 30 days after the last notification of both countries that procedures required by local laws for entry into force are satisfied. It will become effective on 1 January of the calendar year following the year in which the Convention enters into force. Therefore, it is to be seen if the application will start in FY 2026 or in FY 2027, depending on the completion of ratification procedures in both states.
Note: The draft is currently under public consultation and may be subject to further amendments and supplements.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.
