The Montenegrin Ministry of Finance has recently published a new draft of the VAT law, which aligns with EU VAT regulations and imposes stricter rules on the digital economy, online platforms, and internet purchases.
The new law is expected to have the most significant effect on online short-term rental platforms, such as Booking and Airbnb, as well as online marketplaces, and online platforms for the road transportation of passengers in or through Montenegro, which, in certain cases, will be required to calculate VAT and keep detailed records on transactions carried out, which they will need to submit to Montenegrin tax authorities. The aforementioned rule is expected to have a positive effect on the reduction of the grey market in this area.
However, it should be noted that taxpayers with a yearly turnover of 30.000€ or less, regarding goods sold and services offered within Montenegro, are exempt from VAT.
On the other hand, the intention of the lawmaker to bring the Montenegrin legislation into line with the EU acquis is clearly shown with the introduction of the 10.000€ threshold, under which the goods obtained within the Union will not be subject to VAT in Montenegro. The aforementioned exemption, however, will not apply to cases of acquisition of goods, with compensation, within the Union, which is carried out on the territory of Montenegro by a Montenegrin tax resident who carries out his economic activity or a legal entity that is not a tax resident of Montenegro, if the seller is a tax resident in another EU member state who, according to the law of that member state, is not exempt from VAT as a small taxpayer.
Furthermore, the new draft law imposes strict rules regarding the payment of VAT in the cases of transfer of construction land, sale of newly built buildings, VAT treatment of apartments, deduction of VAT in certain real estate transactions, and transfer of shares related to real estate.
Lastly, tax rates of 0 %,7 %, 15% and 21 % related to goods and services remain unchanged.
Prepared by,
Daniel Vujacic, LL.M. (UW)