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Montenegro/December 2013

Montenegrin Ministry of Finance is planning to change the way of taxation for corporate profit as well as taxation of immovable property.

Several scenarios are being discussed by working groups.

One of these scenarios is that all companies with revenue of up to EUR100,000.00 will be taxed with the current rate of 9%, while companies with revenue above this limit will be taxed at 15%. With this model, the government would increase the budget revenue for approximately EUR1 million.

Second scenario is to increase the current rate from 9% to 10% which would raise the budget revenue for EUR3 million, and the third scenario is increasing the corporate income tax (CIT) rate to 11% which would increase the revenue to EUR6 million.

Currently, Montenegro has the lowest CIT rate compared to the other countries in the region: Serbia’s rate is 15%, Bosnia and Macedonia 10%, Slovenia 17% while Croatia’s rate is 20%.

When it comes to immovable property tax, the discussion is to increase the number of physical and legal entities liable for payment of immovable property tax.

One of the possible scenarios is adopting a progressive rate for physical persons that own more than one immovable property. This means that property owners will pay higher tax for 2nd or 3rd property compared to the one which is used for own living.

Besides the abovementioned changes on CIT and immovable property taxation, Ministry of Finance plans to amend the personal income tax (PIT) law by increasing the current tax rate from 9% to 15% for income over EUR100,000.00.

With the PIT package it is expected that the tax rate related to salaries will be increased as well from 9% to 10, 11 or even 12%. The new measures mentioned regarding the salaries will apply to all salaries with no exemption.

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