New VAT exemption incentives in Montenegro

Montenegro/November 2015

Montenegro – as a young country with a small but open economy – is steady on its course of continuously adopting various business incentives. The incentives adopted by the Government are aimed at attracting reputable foreign investors, particularly in selected industry sectors.

The latest incentives relate to a new set of VAT exemption rules which affect investors and the supply of certain products and services. In April 2015, the Ministry of Finance issued a Rulebook closely defining the aspects of such exemptions.

The VAT exemptions relate to the construction of facilities, including luxury hotels with 5 or more stars, energy facilities with capacities of 10MW or higher and capacities for food production. The investors can take advantage of the exemptions by filing a request along with prescribed supporting documentation.

The required supporting documents include construction permits, a statement of a relevant institution stating that the investment could be subject of the incentives, as well as the preliminary value of the project.

Upon acceptance of the request, the Tax Administration issues a resolution as well as control stamps. The investors granted the exemption are required to provide the control stamps to their suppliers, who in turn need to attached the stamps to their invoices.

The Rulebook also defines the VAT exemption procedure for supplies made on the basis of loan agreements for which the State of Montenegro is a guarantor. This exemption can be exercised by an investor on the basis of the resolution issued by the Tax Administration, provided that the investor provides a copy of the tax resolution to its supplier and the supplier’s invoice for VAT exempted deliveries refers to the issued resolution.

The above-discussed VAT exemption incentives are aimed at reducing the cost of investments. It is expected that these incentives will encourage investments in priority sectors defined by the Government of Montenegro, specifically in the tourism, energy and agriculture industries.

Jelena Zivkovic, acting manager & Ivan Petrovic, director
T. +382.20.228.490+382.20.228.490