Covid measure: VAT rate reductions in Montenegro


In light of the new developments related to the Covid-19 pandemic and the preservation of economic activity, Montenegro has introduced new amendments to the Law on Value Added Tax, specifically for services of preparation and serving of food and beverages (with certain exemptions) in catering facilities. The cited provision will apply from August 4, 2020 to August 31, 2021.

The purpose of the amendments is to allow for reduced taxation at a rate of 7% for the preparation and serving of the above categories (except alcoholic beverages) in catering facilities, such as hotels, resorts and similar facilities for short stays, camps and other accommodation, restaurants, mobile catering facilities, and other catering facilities.

In addition, amendments to the law prescribe the application of the reduced VAT rate of 7% for accommodation services in tourist apartments.

Furthermore, amendments have been adopted in regards to the application of a zero VAT rate (exemption from VAT with the right to deduct input VAT). The zero rate application is extended to the :

  • import of products and services on the basis of a concluded donation agreement with state bodies and organizations and bodies of the local self-government unit and other public legal bodies;
  • provision of donation in the form of medical devices and protective equipment to state bodies and organizations and bodies of local self-government units and other public legal bodies, in order to combat the consequences caused by epidemics of infectious diseases.

It is important to point out that the new amendments to the Law on Value Added Tax include the abolition of the reduced VAT rate on services for the preparation and serving of food, beverages and beverages in hotels with at least four stars (in the Northern region) and at least five stars (in the Central and Coastal region).

The above mentioned amendments to the Law on Value Added Tax are part of a larger effort of the Government to support the economy during the Covid pandemic and affect the hospitality sector as well as businesses that provide donations to the state. Please contact our office in Podgorica for further information on how the VAT law amendments may impact your company.

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Fahrudin Sutkovic
Accounting manager
Eurofast Podgorica