On 19 July 2024, the Government of Montenegro introduced a new Fiscal Strategy for 2024-2027. The Fiscal Strategy is pending parliamentary approval and potential amendments. Here are the main announced changes:
Employment and pensions
The key goal of the strategy is to create new jobs, reduce illegal work and payment of salary in cash. The planned changes imply reduction of contributions for pension and disability insurance: (i) levied on the employee – from 15% to 10%; and (ii) levied on the employer – from 5.5% to 0%. In terms of numbers, this means that, for example, on the net salary of EUR 700, employee’s net salary will increase for EUR 42, and employer’s expense will decrease for EUR 46.
The minimum salary increases (from EUR 450) to EUR 600 for employees with high school (from level V of education qualification) and to EUR 800 to employees with university degree (from level VI of education qualification).
It is estimated that pensions will increase by 7-8% for an average of EUR 50. Despite ongoing debates, pensions will continue to be paid exclusively through the Pension and Disability Insurance Fund. The method for calculating pensions remains unchanged.
Personal income tax
The natural person’s income from games of chance will be taxed at a 15% rate on withholding basis. The basis for taxation will be the total income minus the amount of invested funds.
Income from internet activities and video games, as well as income that a natural person receives from another natural person, will be taxed at a rate of 15%.
According to the current Personal Income Tax Act, certain categories of taxpayers who earn income from independent activities are entitled to pay personal income tax at a flat annual rate, provided their annual turnover does not exceed EUR 18,000. Proposed amendments to the law will suggest increasing annual turnover amount to EUR 30,000.
Excise tax
Amendments to the Energy Act will be in the following period with the aim to combat illegal trade in petroleum derivatives. These changes will introduce a process for marking liquid petroleum fuels and biofuels using nanotechnology-based compounds.
The excise tax on “still wines” will be at the same level as the excise duty applicable to carbonated and non-carbonated water with added sugar, i.e. EUR 25 per hectoliter of product).
Value added Tax
The 0% VAT rate on the delivery of products and services for the construction and furnishing of a five-star hotels and catering facilities will be abolished. Also, the exemption from payment of VAT when importing products value up to EUR 75 is cancelled too. The general VAT rate remains 21%.
Legislative changes
The Fiscal strategy also explains planned legislative changes such as:
- adoption of New Games of Change Act which will precisely define the new rules regarding advertising, the proximity of gaming venues to educational institutions, the distribution of gaming revenues, procedure of revocation of licenses for gaming operators, the role of the Gaming Authority, etc.;
- transformation of the Central Registry of Business Entities (CRPS) into the independent body which is separate from the Tax Authority, and enabling complete electronic incorporation of companies and registration of other corporate changes;
- amending the Foreigners Act in terms of introducing electronic application of work permits for foreigners and extending residence and work permits for a period longer than one year.
Feel free to contact Jelena Brajković (Jelena.brajkovic@bdlegal.me) or Radmila Đurišić (radmila.djurisic@bdlegal.me) for more information.
