Guide to Property Taxes in Montenegro
Tax Rate on Rental Income |
|||
| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 10.50% | 10.50% | 10.50% |
Non-resident individuals are generally subject to Montenegrin tax on income derived from sources in Montenegro, including rental income and taxable gains arising from real estate situated in Montenegro. Married individuals are generally taxed separately.
Income Tax
Montenegro applies different personal income tax rates depending on the category and amount of income. Therefore, individual income should not generally be described as being aggregated and taxed at a universal flat rate of 15%.
Income potentially subject to personal income tax includes employment income, self-employment and business income, investment income, rental income and capital gains.
Rental Income Tax
Income derived from leasing real estate situated in Montenegro is generally subject to personal income tax at a rate of 15%.
Taxable rental income is determined after deducting qualifying expenses incurred in generating the rental income.
Where the taxpayer does not document actual expenses, a standard expense deduction equal to 30% of gross rental income is generally available. Consequently, only 70% of gross rent is taxable.
This produces an effective income tax burden of approximately:
70% taxable income × 15% tax = 10.5% of gross rental income.
For certain qualifying tourist accommodation rentals, a higher standard expense deduction of 50% of gross rental income may apply.
Capital Gains Tax
Capital gains realized by an individual from the disposal of real estate situated in Montenegro are generally subject to personal income tax at a flat rate of 15%.
The taxable capital gain is broadly calculated as the difference between the property's sale price and its qualifying acquisition cost, taking into account applicable adjustments and qualifying expenses under Montenegrin tax law.
Certain exemptions may apply, including in qualifying transfers between spouses and close relatives, inheritance-related transactions and certain disposals involving a taxpayer's home, subject to statutory conditions.
Corporate Taxation
Companies are subject to progressive Corporate Income Tax rates ranging from 9% to 15%.
Rental income earned by a company is included in ordinary taxable corporate profit. Qualifying business expenses incurred in generating the income are generally deductible, subject to Montenegrin tax rules.
Capital gains realized by companies are also included in the corporate tax base and subject to the applicable progressive corporate income tax rates.
Buying and Selling Costs and Taxes
| Cost Component | Percentage of Property Value | Who Pays? |
| Property Transfer Tax | 3.00 - 6.00% | Buyer |
| Agent Fee (Seller) | 3.00% - 5.00% | Seller |
| Legal Fees | 1.00% | Buyer |
| Notary Fees | 0.1% | Buyer |
| Costs Paid By Buyer | 4.10% - 7.10% | |
| Costs Paid By Seller | 3.00% - 5.00% | |
| Roundtrip Transaction Cost | 7.10% - 12.10% | Buyer & Seller |
| Source: Global Property Guide, KPMG, PWC | ||
Property Holding Tax
Owners of real estate situated in Montenegro are generally subject to an annual Real Estate Tax. The tax can also apply to persons holding certain rights of use over the property.
The tax is administered by the relevant municipality and is generally calculated on the property's assessed market value.
For ordinary real estate, the annual tax rate generally ranges from 0.25% to 1.00% of market value, with the precise rate determined by the municipality according to factors such as the property's location, type, quality, age and use.
Higher rates may apply to certain categories of property under special rules.
As an illustration, a property assessed at €500,000 would generally incur annual Real Estate Tax of approximately €1,250–€5,000, while a property assessed at €1 million would generally incur approximately €2,500–€10,000, before considering any special municipal adjustments or higher rates.
