Understanding latest taxation changes & program ‘‘Europe Now’’
Updated: May 2023
TAX REFORM 2022 & PROGRAM ‘’EUROPE NOW’’ - UNDERSTANDING & IMPLICATION
The government of Montenegro introduced an economic reform program named ‘’Europe Now’’ to move Montenegro toward smart, sustainable, and inclusive economic growth. Such direction will not only impact the living standards for Montenegrin citizens and residents but as well improve the overall quality of living standards and investment climate of the country.
Europe Now, as an all-inclusive and comprehensive program, has the following aims:
To increase the standard of living
To increase employability
To deduct grey economy
To improve business and investment climate
Proposed measures and introduced changes have the following impact:
Increase of minimal salary
Lower labor taxation
Introduction of progressive taxation
In line with these aims and reforms, the taxation structure has changed in comparison to 2021. Thus, we will try to explain recent taxation changes that might be important for your business and investment opportunities.
Individual income taxation
Personal income tax was 9% and in some cases 11% until January 2022. With introduced tax reform, personal income taxation changed to 15%, and certain taxation structures are defined as follows:
Up to 700eur gross – 0% tax rate
From 700eur to 1000eur gross – 9% tax rate
From 700eur to 1000eur gross - 9% tax rate
From 1000eur and more – 15% tax rate
Over 1000.01 euros gross - 15%
Additionally, for the taxation of personal income from entrepreneurial activity, special tax rate levels are introduced. Under entrepreneurial activity are considered: part-time jobs, consultancy, independent specialists and advisors, self-employed individuals.
For income from 8400eur to 12000eur – 9% tax rate
For income that exceeds 12000eur and more – 15% tax rate
Furthermore, personal income tax of 15% is introduced to:
Income generated from property rental
Income generated from capital (including dividends)
income generated from sports activities
income generated from copyrights, patents, trademarks
income generated from activities in the field of culture
Corporate taxation
Tax reform ‘’Europe now’’ introduced additional changes to corporate taxation structure, so now the corporate tax scheme looks like the following:
Income under 100.000eur – 9% corporate tax rate
Income from 100.000eur to 1.5milion our – 12% corporate tax rate
Income from 1.5million eur and more – 15% corporate tax rate
Minimal salary, taxes, and contributions
Reformative changes have been introduced as well in terms of minimal salary, taxation, and social contributions. Until 2022, the minimum net salary for 40h / week was 250eur. On top of the net salary, the company had to cover additional social contributions and payroll expenses. Initially, for the minimum salary of 250eur total of 162eur in taxes and contributions had to be paid. After the introduction of Europe Now reforms, the minimal salary is 450eur while taxes and contributions are 120eur.
This reform has a positive impact on the salary and contribution structure. The taxation burden was decreased starting from a decrease of a total of 19% as follows: from 39% (for the minimum salary of 250eur) to 20% (for the minimum salary of 450eur).
Introduced reform indicates that Montenegro is working progressively towards the increase of its standard of living and overall business and investment climate in the country.
If you want to understand better the implication of recent tax reform to your business activities, schedule consultancy hours with us and our experts will advise you accordingly.
Author
Bojana Minic
Managing Director | Rufil Consulting Montenegro
How to get in touch with us?
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