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Tax residency in Montenegro: The hidden gem of the Balkans
Montenegro is looking at a bright future with future EU membership on its sight, a new, well-established CBI program, the freest economy in the Balkans, and a year-long touristic destination.
It's one of the best places where to establish your tax residency. The country has one of the best tax systems in Europe and is hungry for investment, meaning the country is wide open for foreigners.
- Simple real estate or equity investment path towards residency in the country.
- The cheapest CBI program in Europe with terrific potential investment returns and EU citizenship for 2025.
- A non-CRS jurisdiction.
- A top 11 % personal income tax rate and 9 % corporate and capital gains tax.
- A 9 % corporate income tax rate.
- More than 40 double tax treaties.
- A territorial tax system for non-residents.
- The freest economy in the Balkans.
- A year-round touristic destination.
Montenegro is a cosmopolitan society as it was historically one of the borders between the Eastern and Western Roman Empire, and centuries later, Catholics, Orthodox, and Muslims have coexisted in its lands.
Montenegro has been long known as the Switzerland of the Balkans. And we certainly agree. Even better: it offers top-level tax optimization.
The country has a 9 % corporate tax rate, capital gains are also taxed at 9 %, and the income tax rate is taxed in a bracket between 9 and 11 %. Even better, the system is territorial for non-resident companies, and Montenegro has a strong network of more than 40 double taxation treaties. All this makes Montenegro an ideal environment for stable and optimized tax planning for investors, family offices, and high-net-worth individuals around the world.
Today, Montenegro continues to be a top destination for investors all over the world looking for a place to relax and search for an easy life while optimizing their taxes.
Aside from the tax benefits mentioned above, Montenegro offers a small yet open economy that has seen a significant FDI flow in the last few years. The fact that the country has reduced public participation in the economy, mainly privatizing state assets, has made investors pay attention to Montenegro. The results are clear: A sustained GDP growth, which has grown in every quarter since 2013, and a 20 % wage growth since 2015.
To make its wonders available for more investors, Montenegro has offered straightforward paths to residency and citizenship for investors to drive their tax residency to this gorgeous country.
Why Montenegro? Five reasons you should move your tax residency to the Black Mountains
Highly touted citizenship program
Montenegro's Citizenship by Investment program is one of the best and most prestigious in Europe, with only 2,000 places reserved and soon to be filled. Rich families find that this is the Switzerland of the Balkan peninsula, with excellent lifestyle opportunities in Central Europe. The fact that Montenegro is set to join the EU by 2025 and that it costs way less than the Maltese and Cypriot programs adds even more appeal to the Montenegrin CBI program.
Beneficial and non-CRS tax system
Personal (9-11%) and corporate tax is extremely low (9%), and tax residency in Montenegro provides great advantages for families to reduce personal income tax. In fact, tax rates are the lowest in Europe.
Also, the system doesn't have any complex deductions or rules, which eases tax planning. Montenegro is not a member of the CRS (Common Reporting Standard), meaning its banks will not automatically report your income to foreign tax authorities.
Open to trusts
Although Montenegro does not have a trust regime, it has no problems with citizens holding their assets through trusts. One of the best schemes in this respect is the Madeira trust regime, which will be recognized by the banks in Montenegro.
Excellent investment opportunities
Operating a company in Montenegro will have one of the lowest corporate tax rates (9%) in Europe. It has excellent banking and great investment opportunities with the fastest growing tourism sector in Europe thanks to its year-long attractions.
The northern part of the country has a terrific winter tourism potential thanks to its skiing mountains, and the south has some of the best beaches in Eastern Europe.
Banks in Montenegro are very loyal to their citizens and residents and provide excellent banking services with a high degree of privacy. This will allow you to protect your assets effectively in Montenegro.
Tax residency in Montenegro
Montenegro has simple tax residency criteria. Tax residents are taxable on their worldwide income. A Montenegrin tax resident is someone who satisfies at least one of the following criteria:
- Spends more than 183 days in a calendar year in Montenegro spend 183 days per calendar year in Montenegro, and you'll be considered a tax resident and are taxable on your worldwide income.
- Has a domicile in Montenegro.
- Montenegro is his center of business and personal activities.
On the corporate side, tax residency has equally simple criteria. A corporate entity is considered a tax resident in Montenegro if:
- It is incorporated in Montenegro.
- It is a foreign company but Montenegro is it’s place of effective management.
- There are no explicit criteria on how to determine effective management but, in general, it’s the place where the primary managerial decisions are made or where the board of the company sits.
There are two main paths to become a Montenegrin tax resident as they'll allow you to live in the country: Receiving citizenship or a residency by investment. However, remember that you must spend at least 183 days to be deemed a Montenegrin tax resident.
Residency by investment
There aren't many ways to receive residency in Montenegro. But there are two common paths opened for investors: real estate investment and company investment.
Let's start with the details of the real estate path:
- The interested individual must be the sole owner of the real estate.
- He must present a clean police record and a bank record showing he has at least €3650 in his bank account.
- The whole process lasts about 30 days, meaning it's incredibly flexible for European standards.
- It can be easily attained as long as you're not deemed as a security risk for Montenegro.
- You must travel twice to Montenegro for the process.
- This path doesn't offer the possibility of receiving permanent residency.
Now, if you wish to follow the path of an equity investment, you must consider the following:
- You must constitute a company in Montenegro (you can check out the process in our Montenegro Country Focus right here ).
- This path gives you the possibility of receiving permanent residency or applying for citizenship after seven years.
- You must have a clean criminal record a police clearance.
Depending on each individual case, you may be required to submit additional documents.
Citizenship by investment
For a detailed explanation of the program, you can check our CBI article right here. However, let's explain the general details. The main requirements are:
- Not being an EU citizen or be subject of sanctions by the EU, UK, USA, or Canada.
- Having a clean criminal record.
- Proof of funds.
- Good health.
- There are two investment possibilities:
- €250k touristic real estate investment in the north + €100k government contribution to assist projects in underdeveloped regions,
- €450k touristic real estate investment in the south or Podgorica (the capital)+ €100k government contribution to support projects in underdeveloped regions.
You can rent out the property you acquire, meaning the total net investment is actually lowered, and you can sell the property after five years of holding the investment.
Do you have a question?
Tax system and residency
The Montenegro tax system is among the best of the best and most underrated across Europe. It can help wealthy individuals and investors reduce their tax burden significantly.
The main taxes in Montenegro are:
- Income tax: 9-11 %
- Corporate tax: 9 %
- VAT: 21 %, and 7 %, and 0 % for tourism and some primary products
- Withholding tax: 9% on dividends, capital gains, rental income, royalties.
That's among the best of the best in Europe. Likewise, the system is quite simple. There are no complicated conditions or deductions. If you ask for a particular tax in Montenegro, it'll likely be 9 %, and that's that. That means the system isn't only stellar for its incredibly low rates, but because it's simple and allows stable tax planning.
Montenegro isn't part of the CRS, meaning all income remitted to Montenegro won't be automatically reported to foreign authorities.
And all this in a fully onshore, transparent, and simplified jurisdiction. To show you the benefits you can obtain from moving your tax residency to Montenegro, we have to explain a bit of the system.
Tax residents (both individuals and companies) are taxable on their worldwide income.
First, what income is taxable for individual tax residents in Montenegro?
- Personal earnings from salaries and bonuses
- Self-employment income
- Real estate income
- Capital income
- Capital gain income
- Lottery prizes
What income isn't?
- Travel allowances up to the amount of actual expenses, including accommodation, travel, food, and commuting.
- For business trips abroad, travel stipends up to the limit for public employees.
- Allowances to use vehicles for business purposes.
- Pension severance payments up to €1k.
- Funeral costs up to €1.5k.
Now, what income is taxable for companies?
- Income deriving from the ordinary business activities of the company.
- Transfer and renting of real estate.
- Dividends (subject to 9 % withholding tax).
- Interests (subject to 9 % withholding tax on payments to residents, 5 % on payments to non-residents).
- Capital gains (9 %).
Corporate tax has several deductions, such as expenses in medical insurance and retirement plans. Companies can also, generally, deduct losses easily.
The income tax rate is a bracket between 9 % and 11 %. You pay 9 % for all income below the national average (€9,000 per year) and 11 % of all income above the average. On top of that, municipalities charge a 15 % surtax over what you pay in national income tax.
Let's make an easy example saying you have a yearly income of €100,000. In this case:
- You'll pay 9 % on your first €9,000 (€810.)
- You'll pay 11 % on the remaining €91,000 (10,010).
- That's a total of €10,820 in income tax.
- That would mean an additional yearly municipal surtax of €1,623.
Compare that to the OECD average, which is 23.91 %, and even higher on high net worth individuals. A similar €100,000 income would mean paying almost €24,000 in income taxes. And that's even before considering capital gains, dividends, rental income, and social security contributions.
Also, many of these systems have complex brackets, deductions, credits, exemptions, additional wealth taxes you must consider, etc. Montenegro eases all that: A simple two-tiered bracket system for the income tax plus a municipal surtax and a 9 % tax on capital gains and investments. This includes:
- Interest revenues.
- Shares and money income on a profit-sharing scheme.
- Income from company properties or services by owners of co-owners for their purposes.
- Dividends and profit shares.
- Income from shares received by directors and other employees.
Rental income also has a 9 % tax rate. The tax base for it is calculated deducting the maintenance costs of the property or deducting 40 % of the gross income. If the property is used for touristic purposes, it can be of 50 % or 70 % if the contract is made with a touristic agency.
You may be saying: hey, this is wonderful, but what if my country hasn't signed a double tax treaty with Montenegro? Simple: Montenegro offers a tax relief up to the amount of the tax paid in another country without exceeding the tax that would be paid in Montenegro. Let's continue with the example mentioned above:
- You earn a €100,000 yearly income.
- The other country meaning to tax your income, has an income tax rate of 23.91 % (the OECD average, to simplify the example).
Thus, the relief proceeds as follows:
- You'd have to pay €23,910 in taxes in the first country.
- You'd have to pay €10,820 in taxes in Montenegro, which would be your tax relief, meaning that:
- From the €23,910, you should pay in taxes in the first country, you'll get a relief to lower your tax payments all the way to €13,090
Who are we, and what can we do for you?
In Mundo, we work alongside NTL, a firm that´s been working for 25 years offering top services for high net worth individuals. We want to help you live, invest, and work freely. We believe you, and only you should spend the money you've earned whenever and wherever you want way afar from Big Brother.
That's why we offer paramount financial, tax, immigration, asset protection, and corporate advice all over the world. We know Montenegro is one of the best and most underrated onshore jurisdictions on the planet, especially in Europe.
It's an ideal place to optimize your taxes and be able to make stable and simple tax planning.
And we can help you with that. We work with a team of experts with more than 25 years of experience offering tax and immigration services all over the world. In fact, they were one of the first three approved service providers for the CBI program, which shows their level of expertise and trustworthiness.
We can help you move to Montenegro and establish your tax residency in the home of the Emperors. We offer top tax advice to help you protect and diversify your assets to take advantage as much as possible of the incredible Montenegrin tax system.
Do you want to know more about our tax services in Montenegro? Enquire now!
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