Being a relatively small country with little natural resources, Montenegro’s economy is mostly based on the service industry (tourism) but also on the foreign investments. The foreign investors are encouraged to invest capital in local companies even if they’re not residents, by a series of incentives taken by the Government, such as signing double tax treaties with a series of countries.
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Double tax agreements concluded by Montenegro
Montenegro has signed bilateral agreements regarding the avoidance of the double tax treaties with Albania, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Iran, Italy, Korea, Kuwait, Latonia, Macedonia, Malaysia, Moldavia, Holland, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine and United Kingdom so far.
Besides these treaties, many other draft agreements are still in discussion. The treaties are signed by the Ministry of Finance’s representative and ratified and after that they can enter in force.
The importance of DTAs signed by Montenegro
This type of treaty is crucial for attracting foreign investors in Montenegro. The possibility of double taxation of income is excluded. The incomes are taxed in Montenegro (through the credit method) or in the residency country (through exemption).
It is necessary to bring sufficient evidence regarding the residency of an applicant if he wants to beneficiate from the double tax treaty’s provisions. Usually, a certificate of residency and a proof from a competent foreign tax authority regarding the fact that the candidate is already paying taxes there are necessary. This way, the tax frauds are avoided. Our specialists in company formation in Montenegro are ready to help investors take advantage of the double taxation agreements concluded by this country.
Another method of avoiding the tax frauds is by exchanging information regarding the tax payers of the treaty countries. These regulations are stipulated at the end of the double tax treaties. Montenegro may also sign tax information exchange agreements if the regulations from the treaty are not sufficient.
Withholding taxes in Montenegro
Usually the withholding taxes in Montenegro for the dividends, interests and royalties paid to a resident or a non resident is 9% (with some little exceptions). A double tax treaty is also regulating this tax, which is usually smaller or even exempt by its regulations.
If a non resident has contributed with a sufficient amount of money or kind to the company’s capital, the withholding taxes on dividends may be non taxable.
For more details about the provisions of a certain double tax treaty concluded by Montenegro, feel free to contact our Montenegro company formation experts.