Montenegro Crypto Tax

The small Balkan jurisdiction of Montenegro boasts one of the most competitive tax systems in Europe since it has a lower tax burden, yet at the same time, it offers a stable business climate. What it means in relation to such innovative businesses as crypto is a field for extensive experimentation with edge-cutting ideas within a fairly relaxed and unregulated system. On the other hand, one should also consider that currently Montenegro is in negotiations with the EU and aims to join the organisation in the forthcoming years. This means stricter tax regulations for automated tax reporting among others to national and foreign authorities.

Tax Administration of Montenegro is the national body responsible for collecting taxes, carrying out inspection and enforcing compliance. The basic operational principle is self-assessment for tax liabilities; the general requirement is a need for businesses and persons to file annual returns. Currently, there are no specific crypto taxation rules, so each crypto business should be determined on a case-by-case basis by applying the general framework of taxation. Our team here at Regulated United Europe (RUE) is always in a position to assist.

Advantages of the Montenegrin Tax System

Montenegro signed more than 40 international agreements on the avoidance of double taxation with its major trading partners protecting businesses deriving cross-border income from double taxation. They lay down rules for determining in which country the right to tax this business or person is vested within its national taxation system. In this way, Montenegro wants to attract international investors looking for security of treatment and optimized taxation.

Another significant benefit represents an exemption from Corporate Income Tax, which applies only to newly established businesses operating solely in the underdeveloped municipalities of Montenegro. This includes exemption from the first 200,000 EUR of company income tax and is available for the first eight years of activity, and that should be long enough to grow your crypto business.

Furthermore, in Montenegro, there is special tax status for innovative firms and is governed by the following acts and rulebooks, inter alia:

• Innovation Activity Act
• The Act on the Incentives for Research and Innovation Development
• Rulebook on Registry of Innovation Activity
• Rulebook on Closer Conditions for Acquiring the Status of the Beneficiary of Incentive Measures for Development of Research and Innovations

Eligible innovative companies may receive incentives with regard to Corporate Income Tax, Personal Income Tax, surtax, contributions to social insurance, fees for communal equipment of construction land, use of state-owned real estate, and Real Estate Tax. In general, it is the legal form and business model of the company that provides the answer to whether incentives are available. For example, startups and spinoffs could be exempted from Personal Income Tax and surtax for their employees and other persons involved, respectively, for five years starting from the date of establishment of the company. Besides, they shall be exempted from the employer’s Social Insurance Contributions three years from the issuance date of the decision to give the incentive.

The following companies are also exempted from Corporate Income Tax:

• Companies recorded in the Registry of Innovation Activity that reinvest their profit into innovative, scientific, and research projects
• Companies that reinvest their profit into purchasing shares of startups or spinoffs
• Companies that donate their profit to scientific research institutions and entities of innovation infrastructure, with the requirement that the donation must be done for projects and scientific research facilities.
• Companies reinvest their profit into the Innovation Fund – established by the Montenegrin government, or to some other investment fund in Montenegro, which invests in innovative activities

Corporate Income Tax

The rate of Corporate Income Tax in Montenegro is progressive and amounts to 9% up to 15% of the realised profits. Tax resident companies are taxable on income sourced in Montenegro and abroad, while non-residents are taxable on income sourced in Montenegro or income attributed to their Montenegrin permanent establishment. A company is a resident for tax purposes if it is incorporated under Montenegrin law or has a place of effective management in Montenegro where key executive decisions are usually made.

The rates are as follows:

• If the profit is up to 100,000 EUR – the rate is 9%
• If the profit is more than 100,000 EUR but less than 1.5 million EUR – the tax is 9,000 EUR plus 12% on a profit above 100,000 EUR
• If the profit is above 1.5 million EUR – the tax is 177,000 EUR plus 15% on the profit above 1.5 million EUR

Value-Added Tax

The standard VAT rate in Montenegro is 21%, levied on products and services sold in Montenegro. It would also be imposed in conformation with the national VAT rules aligned with the EU’s 6th VAT Directive, which among other things means that VAT is paid to the government of the country of residence of the consumer.

The VAT base shall be determined based on the compensation received in cash, goods, or services for the supply of goods or services and such direct costs as commissions, packaging, and transport. If the compensation isn’t in cash, then the VAT base will be determined based on the market value of the goods, assets, or services received at the time of supply – which could be the case with cryptocurrencies.

In a case when the annual company turnover is below 30,000 EUR, it has the right to register itself as a VAT payer. Registration as a VAT payer will be obligatory when the threshold is exceeded. Moreover, it is forbidden for a firm that had been registered as a VAT payer in Montenegro to apply for removal from the register for at least three years. Liable businesses have to file and pay VAT on a monthly basis.

Capital Gains Tax

In the case of organizations, capital gains are summed up with the taxable income and levied in accordance with the progressive Capital Income Tax that varies between 9% to 15%. Where capital gains by individuals are concerned, it is taxed at 15% of the gain made. The gains from capital are calculated by subtracting the cost of purchase and sale expenses and fees associated from the sale price of a particular asset sold. Currently, there are no crypto-specific regulations concerning Capital Gains Tax, and in any case, it is necessary to consult a tax professional to establish the amount of your tax liability.

Withholding Tax

The general Withholding Tax is 15% and generally applies to income obtained in Montenegro that is paid to non-residents. The following shall be included in the list of taxable kinds of income: dividends, interest, capital gains, fees connected with intellectual property rights, market research and consulting fees, audit service fees. Dividends and shares of profits paid to Montenegrin tax residents will be subject to tax, too, while in turn, Montenegrin tax residents don’t have to pay a tax on their interest and royalties. An applicable double taxation agreement may permit a reduced rate or exemption on condition that the recipient of taxable income is able to demonstrate ownership over the income to be distributed and has a tax residence certificate issued by the relevant foreign tax authority.

Payroll Taxes in Montenegro

Different national and municipal taxes are charged on employees’ salaries, and therefore, any crypto company employing people in Montenegro is under obligation to register as an employer who calculates, deducts, and remits taxes due to the relevant authorities for and on behalf of employees. The withholding taxes are Personal Income Tax and Social Security Contributions covering healthcare, pension, unemployment, and disability.

Personal Income Tax rates are progressive, and the following respective shares will be applied to salaries: the tax exemption will refer to the gross salary up to 700 EUR; gross salary from 701 to 1,000 EUR: 9%; and gross salary starting from 1,001 EUR: 15%.

Social Security Contributions are payable both by employers and employees. The contributions payable by the employer represent an operating expense, while the contributions payable by the employee are deductible from gross salaries. Annual pension and disability insurance contributions are capped at 54,553 EUR, and the remaining contributions are not capped.

Montenegrin employers are liable for the following rates of Social Security Contributions:

• Pension and disability insurance – 5.5%
• Unemployment insurance – 0.5%

The following rates address employees of crypto companies in Montenegro:

• Pension and disability insurance – 15%
• Unemployment insurance – 0.5%

How to Pay Taxes on Crypto in Montenegro 2024

In 2024, Montenegro proceeds to work out its methods and approaches to taxing income from cryptocurrencies, guided by the further spread of digital assets. It is intended that a just and transparent tax system will be created for transactions with cryptocurrencies, considering their features and potential for the economy of Montenegro.

Taxation of cryptocurrency-sourced revenues

In general, income derived from the trade of cryptocurrency and other types of activity with digital assets in Montenegro are subject to taxation. That means income from cryptocurrencies might have been viewed as either capital gains or business activity and thus had a tax accordingly to their nature.

Tax Declaration

Taxpayers need to declare their cryptocurrency earnings on their annual return of income. The income should be correctly characterized, and related deductible expenses should be considered to determine the assessable basis. It should be converted into local currency at the applicable exchange rates for the date received.

Tax Rates

Income tax for individuals may also be levied on incomes from cryptocurrency at a rate of 15% – the highest for individuals in Montenegro.

Corporate tax: Any legal entity dealing in cryptocurrencies will be liable for a corporate tax rate of 9%.

Capital gains tax

Gains derived from the sale of such cryptocurrency, exceeding the initial cost of acquiring it, can be liable to capital gain tax. However, regarding the precision and rate of capital gain tax, one should be aware that it may vary based on the current legislations on taxes.

VAT and other taxes

Currently, cryptocurrency transactions in Montenegro are beyond the scope of VAT, but the tax policy is to be revised taking into consideration further development of the cryptocurrency market and international recommendations.

In a nutshell, in Montenegro in 2024, proper income classification and documentation of all transactions are the general bases governing the taxation of cryptocurrency income. Due to the high level of complexity in this area of taxation, it is recommended that taxpayers consult professional accountants or tax advisors for optimization while still adhering to their tax obligations. As the market conditions for cryptocurrencies and the laws on tax change, one has to adapt to them.

Table with basic rates of taxation – Montenegro

These rates reflect the tax policy of Montenegro in support of economic development and attraction of investment. Relatively low tax rates make the country appealing for business and individual entrepreneurs alike.

If you plan to bring your new crypto project to life in Montenegro and want to optimize taxes, highly qualified and experienced legal consultants here at Regulated United Europe (RUE) will be glad to help you. We are aware of and closely follow both local and international taxation rules applying to cryptocurrency businesses, trying to make sure that our clients are not only in compliance with local regulations but also working in the most tax-efficient way. Furthermore, we would be more than happy to help you with the formation of a new Montenegrin crypto company, crypto licensing, and financial accounting. Book a private consultation now to receive all-around legal advice, which will lay the foundation for your success.

Also, lawyers from the Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.