Corporate income taxes
Last reviewed 21 Aug 2023
Object of taxation
Income
Tax rate
Progressive corporate tax rate:
- up to EUR 100.000,00 - tax rate 9%;
- from EUR 100,000.01 to EUR 1,500,000.00 ( EUR 9.000,00 +12% on the amount above EUR 100.000,01)
- above EUR 1,500,000,01 ( EUR 177,000.00 +15% on the amount above EUR 1,500,000.01).
Tax liability
N/A
Unlimited
Limited
Financial year
Calendar year, except in case of liquidation or commencement of the business activity during the year.
Accounting
Double-entry bookkeeping (mandatory application of IFRS and IAS for certain entities).
Loss carryback
N/A
Loss carryforward
Loss carry forward for limited period of 5 years. No loss carry back.
Shell company purchase
N/A
Operating expenses
Expenses of the business
Transfer prices
Arm’s-length basis. Companies are not obliged to prepare and submit to the Tax Authorities transfer pricing documentation in case they have related party transactions but they are obliged to test transfer prices and make adjustment of the CIT base if necessary.
Interest on debt financing of acquisition of shares
Deductible under the same conditions as interest payable on other type of borrowings made in the course of doing business.
Interest paid to the associated party is deductible in the amount which does not exceed the cost of interest on the open market.
Interests paid to the non-residents if interest is paid at a rate higher than the usual commercial rate.
Debt / equity
N/A
Tax depreciation
For tax purposes fixed assets are divided into five groups: I group (immovable) = straight line method
II - V group (all other assets) = declining balance method (annual depreciation).
Accounting depreciation depends on accounting policy of the company and is not deductible for tax purposes.
Provisions
Tax deductible provisions:
- long-term provisions for renewal of natural wealth and for expected losses arising from litigation;
- warranty period costs;
- mandatory provisions in line with special laws for banks, insurance etc. are tax deductible to the extent legally required.
Motor vehicle expenses
15 % tax depreciation rate; declining balance method is applied.
Non-deductible expenses
- non-business driven expenses;
- non-documented costs;
- interest costs for late payment of taxes;
- interests paid to the non-residents if interest is paid at the rate higher than the usual commercial rate;
- administrative expenses paid by non-resident permanent establishment to its head office;
- earnings of employees or other persons based on profit distribution;
- fines and penalties
- penalties imposed by the authorities, contractual parties and other penalties;
- adjustments of individual claims from persons that are also creditors;
- costs of material and the purchase value of sold merchandise goods which are not calculated using the average cost method or FIFO method, in accordance with the accounting legislation;
- severance payments and jubilee awards exceeding the amount determined by labour legislation;
- contributions to political organizations;
- expenses for investments in education, science, culture, humanitarian activities exceeding 3,5 % of total revenues;
- representation expenses above 1 % of total revenues;
- membership fees exceeding 0.1 % of total revenues;
- impairment of assets (recognized when disposed);
- penalty interest between related parties
- adjustment of the value of individual receivables from the person to whom it is simultaneously owed, up to the amount of the liability to that person;".
- The costs of salaries, royalties, remuneration based on contracts for work and other income paid to natural persons on the basis of occasional self-employment, costs of severance pay upon retirement, costs due to technological redundancy and other payments of compensation upon termination of employment, are recognized as expenses for tax purposes in the period when their payment was made.
Rental income: 15 % (a lower rate may be provided in the applicable DTA). Capital gain: 15 % (a lower rate may be provided in the applicable DTA). 15 % (a lower rate may be provided in the applicable DTA).
Services: 15 % (a lower rate may be provided in the applicable DTA). Services subject to withholding tax are consulting services, market research services and audit services.
Interest barrier
N/A
Interest and royalties to intra-group companies
N/A
Withholding taxes
Statutory withholding tax rate is 15 %. A lower rate can apply, provided that it is envisaged by a double taxation agreement (DTA).
Interest
15 % (a lower rate may be provided in the applicable DTA).
Royalties
15% (a lower rate may be provided in the applicable DTA).
Dividends
15 % (a lower rate may be provided in the applicable DTA).
Controlled foreign corporation (CFC) rules
N/A
Hybrid mismatches
N/A
National parent- subsidiary exemption
N/A
International investments
N/A
International parent- subsidiary exemption and portfolio investments
N/A
Goodwill amortisation
N/A
Group taxation / pooling
Tax groups
Tax consolidation allowed on request if all associated parties in a group are Montenegrin residents and if parent company indirectly or directly holds more than 75 % of shares in the associated companies.
Pooling
N/A
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