Operation of the Companies, Tax and Other Incentives

Article 15

* Independence and Freedom of Operation
o The company is independent and free to operate, gain, and distribute its income, as well as dispose of its property.
* Investment Right
o The company and qualified individual can invest capital in the territory of the republic of Montenegro with government consent.

Article 16

* Profit Tax
o The company pays profit tax at the rate of 2.5%.

Article 17

* Tax Basis
o The taxable revenue will be determined by Internationally accepted accounting rules.
* Government Regulation
o The Government will provide further definitions of what can be counted as expenditure when calculating the total revenue.

Article 18

* Tax Breaks
o A company is exempt from sales, property, building or land taxes.

Article 19

* Exemption from Sales Tax
o Qualified individuals do not pay sales tax on cars, yachts, household appliances, or other technical facilities and furniture for personal use. Qualified individuals do not pay any on the transfer of assets for land and buildings used for accommodation. Qualified individual cannot transfer such products and equipment to any legal entity or individual for at least five years commencing the date of their arrival.

Article 20

* Tax on emoluments of employees
o The emoluments of company employees are subject to tax at the rate of 5%. Contributions on the emoluments of the company employees who are Yugoslavian citizens are payable only to pension and health insurance funds at rates defined by the Government.

Article 21

* Exemptions from Taxes on Services
o The income of a qualified individual services earned by rendering services outside the Republic are tax exempt.

Article 22

* Other Tax Exemptions
o All investments made by a qualified individual in Montenegro (such as: business and residential buildings, equipment for the offices and homes, ships, yachts, cars, and similar items) will be tax exempt.
* Tax on the Income of a Qualified Individual
o Personal income tax will be 5%.
o Any pension income will be taxed at a rate of 2%.

Article 23

* Exemptions from Inheritance and Capital Gains Taxes
o A qualified individual will be exempt from inheritance tax and any tax on capital gains made in the Republic.

Article 24

* Fixed Assets Sale
o Fixed assets referred to in Art 19 of this law can be sold by a qualified individual to a local legal entity or to an individual on condition that the sales tax from which he was exempted at the acquisition is now paid.

Article 25

* Exemption from Fees and Local Charges
o A company or a qualified individual does not pay local administrative fees or other charges.

Article 26

* Exemption from Customs Duties
o A company does not pay any customs duties or other charges on imported equipment and objects necessary for company activity.
o A qualified individual does not pay duties or other import charges on cars, yachts, household equipment, technical appliances, and furniture to be used personally.

Article 27

* Exchange Control
o A company or a qualified individual has the status of a foreign company regarding exchange control.

Article 28

* Tax Returns
o A company is obliged to file a tax return i.e. to submit data necessary for the assessment of the taxable income to the tax authorities.

Article 29

* Company Bookkeeping
o A company keeps books in accordance to accepted international bookkeeping standards. A company may open accounts at the authorized banks in the Republic.

Article 30

* Foreign and Local Currency Accounts
o A company may open a currency account at the bank which has considerable authority in Montenegro, and local currency account with National Bank of Yugoslavia.

Article 31

* Company Closing

A company may close by ministerial decree. This may occur for the following reasons:

o if the company fails to comply with provisions of this law, or

o if the company is inactive for five consecutive years. Annulment of Company registration occurs within 15 days decree.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.