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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.
Montenegro offers:
- 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 network individuals around the world.
About Montenegro
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 sustainedGDP
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 are 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.
If you want to know
more about trusts in Madeira, check out our article right her .
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.
Quality banking
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 a
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 an 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 is 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 its 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 inunderdeveloped regions,
or
- €450k touristic real
estate investment in the southor Podgorica (the capital)+ €100k government contribution
to support projects inunderdeveloped 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.
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:
- Incometax: 9-11 %
- Corporatetax: 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
individual 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'sa 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:
- Interestrevenues.
- 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 frim 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 earnedwhenever 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
from the incredible Montenegrin tax system.
Do you want to know more about our tax services in Montenegro? Enquire now!
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