Montenegro Property Taxes Explained

Understanding property taxes in Montenegro is essential for buyers. While rates remain competitive, important changes took effect in January 2024.

Property Purchase Taxes

Transfer Tax (Porez na Promet) - UPDATED 2024

Progressive rates now apply:

This replaced the previous flat 3% rate in January 2024.

Calculation Example - €300,000 property: - First €150,000 × 3% = €4,500 - Remaining €150,000 × 5% = €7,500 - Total transfer tax: €12,000 (4% effective rate)

Calculation Example - €800,000 property: - First €150,000 × 3% = €4,500 - Next €350,000 × 5% = €17,500 - Remaining €300,000 × 6% = €18,000 - Total transfer tax: €40,000 (5% effective rate)

Payment: - Paid to tax authority before registration - Due within 15 days of contract signing - Buyer typically pays (negotiable)

VAT on New Builds

Rate: 21% (included in price from developers)

When VAT applies: - First sale of new property - Sale by construction company - Properties under 2 years old

Important: Either transfer tax OR VAT applies, not both. Most resale properties pay transfer tax only.

Annual Property Tax

Rate: 0.1% to 1% of taxable value annually

Rates vary by municipality:

Taxable Value Based on official cadastral value, typically below market price.

Example: - Market value: €200,000 - Official taxable value: €150,000 - Tax rate: 0.5% - Annual tax: €750

Payment: - Billed annually by municipality - Due dates vary - Can often be paid in instalments

Rental Income Tax

Rate: 15% of net rental income

Deductible Expenses: - Property management fees - Maintenance and repairs - Insurance - Depreciation (for businesses)

Example: - Annual rental income: €12,000 - Deductible expenses: €2,000 - Taxable income: €10,000 - Tax: €1,500 (15%)

Filing: - Annual tax return required - Due by March 31 - Quarterly advances may be required

Short-Term Rental Tax

Tourist Tax - €0.50-1.50 per guest per night - Varies by municipality - Separate from income tax - Collected and remitted by property

Capital Gains Tax

Rate: 15% of the gain

Calculation: - Sale price minus purchase price - Minus documented improvements - Minus transaction costs

Example: - Purchase price: €200,000 - Sale price: €250,000 - Improvements: €20,000 - Gain: €30,000 - Tax: €4,500 (15%)

Important notes: - No exemption based on how long you've owned the property - No primary residence exemption - Losses can offset other capital gains

Inheritance and Gift Tax

Rates: 0% to 3%

• Direct line (children/parents): Exempt
• Siblings: 2%
• Others: 3%

Properties passed to spouse or children are tax-free.

Tax Residency Impact

If Tax Resident in Montenegro - Taxed on worldwide income - Must declare foreign property income - May benefit from double tax treaties

If Non-Resident - Only taxed on Montenegro income - Property tax still applies - Rental income still taxable

Tax Calendar

Minimising Tax Legally

Property Purchase: - Consider purchase structure (personal vs company) - Time purchases strategically - Ensure valuations are accurate

Rental Income: - Document all deductible expenses - Consider registering as business for more deductions - Keep receipts for maintenance

Sale Planning: - Document all improvements for cost basis - Consider timing of sale - Offset gains with losses where possible

FAQs

Q: Can I pay property tax from abroad? A: Yes, by bank transfer to municipality account. Get payment details from tax office.

Q: Has the transfer tax really changed? A: Yes, since January 2024 the progressive rates (3%/5%/6%) replaced the old flat 3% rate.

Q: Is there wealth tax? A: No wealth tax in Montenegro.

Q: Are property taxes going up? A: The transfer tax bands were introduced in 2024. EU accession may bring further changes.

Getting Help

Tax Office Local branches in all major towns. Bring translator if needed.

Tax Advisors Several English-speaking firms specialise in expat property taxation.