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On November 4th, the government of Montenegro announced the Europe Now program which sets the strategic goal of Montenegro’s economic policy – achieving smart, sustainable, and inclusive economic growth that will contribute to improving the quality of life of all its citizens. 

This ambitious plan aims to increase the living standards of all citizens, improve the business and investment environment and reduce the grey economy in the labour market. Europe Now is based on the willingness of the state to give up part of the revenue in favor of the employee and employer; thus creating an environment for new job opportunities and expanding the tax base. 

Bearing in mind that the quality of life depends on disposable income, the tax burden on wages in Montenegro is the highest in the region and that only in Montenegro there is no non-taxable part of wages, economic program Europe now proposes the following set of measures, primarily in tax policy: 

  • Increase of the minimum wage from 250€ to 450€ in net amount; 
  • Reduction of costs for employers through lower tax burden on labour; 
  • Introduction of progressive taxation as a more efficient model of taxation; 
  • Introduction of the non-taxable part of the salary of 700€ on the gross basis (rate 
  • income tax of 0% on a gross basis of up to 700€);
  • Introduction of an increased income tax rate of 15% on the gross base above 1,000€; 
  • Abolition of the obligation to pay contributions for compulsory health insurance. 

With the proposed changes, the tax burden on wages is reduced from 39% to 20.4 percent for the lowest amounts of income which are then progressively increased to a level of 31.3% for the highest amounts of net salaries of 2000€ and up.  

The suggested tax reforms are expected to lead to a general increase in wages in the economy and government agencies. 

Europe Now is also prone to increase the withholding tax rate from 9% to 15% and introduce progressive rates on profit of legal entities amounting to 9%, 12% and 15%, depending on the amount of taxable profit instead of the proportional corporate income tax rates of 9% that applied so far.   

Tax rates on the amount of taxable profit are: 

  1. up to EUR 100,000.00€ – 9%; 
  2. from 100,000.01€ to 1,500,000.00€: 9,000.00€ + 12% on the amount over 100,000.01€; 
  3. over 1,500,000.01€: 177,000.00€ + 15% on the amount over 1,500,000.01 euros. 

Other measures put in forward by Europe Now relate to increasing excise duties on tobacco products, alcohol, and alcoholic beverages, the introduction of excise duties on sugar, cocoa and ice cream products, as well as taxation of undeclared income, taxation of cash withdrawal by legal entities, implementation of new law on gambling games and improving control in the field of inspection supervision. 

The very purposeful program Europe Now encounters both positive reactions and public criticism, which relate to the sustainability of such a system and the burden on employers and the state it imposes.  

If adopted by the Parliament of Montenegro, program Europe Now will be implemented as of January 1, 2022.  

For additional information, please contact Mr. Fahrudin Sutkovic, Accounting Manager in our Eurofast office in Montenegro, Podgorica at fpodgorica@eurofast.eu 

Eurofast is a regional business advisory organization employing local advisors in over 23 cities in South East Europe & the Middle East (SEEME). The Organisation is uniquely positioned as a one-stop-shop for investors and companies looking for professional services in Tax & Transfer Pricing – Payroll & Employment – Accounting & Audit –Advisory & Corporate. 
Fahrudin Sutkovic
Accounting Manager
Eurofast Podgorica
podgorica@eurofast.eu