Montenegro Crypto Tax

Montenegro, the tiny Balkan jurisdiction, boasts one of the most competitive tax systems in Europe as it has a smaller tax burden than other European countries, while also offering a stable business environment. For such innovative businesses as crypto, it means plenty of opportunities to experiment with cutting-edge ideas within a fairly relaxed and unregulated system. At the same time, it’s important to keep in mind that Montenegro is currently in negotiations with the EU as it aims to join the organisation within the next few years, which will result in stricter taxation rules, including automated tax reporting to national and foreign authorities.

The Montenegro Tax Administration is the national authority responsible for the collection of taxes, inspection, and enforcement of compliance. Its basic operational principle is self-assessment for tax liabilities, which means that businesses and individuals are generally required to submit annual tax returns. Currently, the authority has no specific rules for crypto taxation, which is why every crypto business should determine its case individually by applying the general taxation framework. Our team here at Regulated United Europe (RUE) is always here to help.

Advantages of the Montenegrin Tax System

Montenegro has signed over 40 international agreements on the elimination of double taxation with its main trading partners, which protect businesses that source cross-border income from being taxed twice. They provide rules for defining which country has the right to tax the business or individual within its national taxation framework. This way, Montenegro seeks to attract international investors who are looking for certainty of treatment and optimised taxation.

Another important advantage is the exemption from Corporate Income Tax, which applies to newly established businesses exclusively operating in the underdeveloped municipalities of Montenegro. The exemption covers the first 200,000 EUR of the company’s taxable income, and it’s available for the first eight years of business, which should be enough for a crypto business to mature.

Moreover, Montenegro offers a special taxation environment to innovative businesses in accordance with the following legislation and rulebooks:

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

Eligible innovative companies can avail of incentives pertaining to Corporate Income Tax, Personal Income Tax, surtax, Social Insurance Contributions, fees for communal equipment of construction land, the use of state-owned real estate, and Real Estate Tax. The availability of incentives is primarily determined by the legal structure and business model of the company. For instance, startups and spinoffs can be exempt from Personal Income Tax and surtax for their employees and other engaged persons for up to five years following the date of establishment of the company. They can also be exempt from the employer’s Social Insurance Contributions for three years following the issuance of the decision to give the incentive.

The exemption from Corporate Income Tax also applies to the following companies:

• Companies registered with the Registry of Innovation Activity who reinvest their profit in innovative, scientific, and research projects
• Companies that reinvest their profit in the purchase of shares of startups or spinoffs
• Companies who donate their profit to scientific research institutions and entities of innovation infrastructure provided that the donation is made specifically for projects and scientific research infrastructure
• Companies who reinvest their profit into the Innovation Fund established by the Montenegrin government or other investment fund in Montenegro that invests in innovative activities

Corporate Income Tax

In Montenegro, the rate of Corporate Income Tax is progressive and ranges from 9% to 15% depending on the realised profits. Tax resident companies are taxed on their income sourced in Montenegro and abroad, and non-residents are taxed on their income sourced in Montenegro or income attributed to their Montenegrin permanent establishment. A company is considered a resident for tax purposes if it’s incorporated under Montenegrin law, or has a place of effective management in Montenegro where key executive decisions are made.

The rates are as follows:

• If the profit is up to 100,000 EUR – the rate is 9%
• If the profit exceeds 100,000 EUR but is less than 1,5 mill. EUR – the tax is 9,000 EUR plus 12% on a profit above 100,000 EUR
• If the profit is above 1,5 mill. EUR – the tax is 177,000 EUR plus 15% on the profit above 1,5 mill. EUR

Value-Added Tax

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

The VAT base is calculated based on the compensation received in the form of cash, products, or services for the provision of products or services and such direct costs as commissions, packaging, and transport. If the compensation isn’t paid in cash, the VAT base will be calculated based on the market value of the products, assets, or services received at the time of supply, which might be the case for cryptocurrencies.

If the company’s annual turnover is less than 30,000 EUR, registration as a VAT payer is voluntary. Once this threshold is exceeded, it becomes mandatory to register as a VAT payer. Also, once a company is registered as a VAT payer in Montenegro, it’s not allowed to apply for removal from the register for at least three years. Liable businesses must submit and pay VAT on a monthly basis.

Capital Gains Tax

For companies, capital gains are included in taxable income and are taxed in accordance with the progressive Capital Income Tax, which ranges from 9% to 15%. Capital gains for individuals are taxed at a 15% rate. Capital gains are calculated by subtracting the purchase price and associated sale costs and fees from the sale price of a sold asset. Currently, there are no crypto-specific rules in relation to Capital Gains Tax, and you should have your particular case assessed by a tax specialist in order to determine your tax liability.

Withholding Tax

The standard Withholding Tax is 15% which is generally levied on income sourced in Montenegro and distributed to non-residents. Taxable income types include dividends, interest, capital gains, fees for intellectual property rights, market research and consulting fees, and audit service fees. Dividends and profits from shares distributed to Montenegrin tax residents are also taxable, but Montenegrin tax residents don’t have to pay tax on interest and royalties. An applicable double taxation agreement can allow for a reduced rate or exemption, provided that the recipient of taxable income can prove ownership over the income to be distributed and has a tax residence certificate issued by the relevant foreign tax authority.

Payroll Taxes in Montenegro

Various national taxes and municipal surtaxes are imposed on employee salaries and therefore every crypto company employing people in Montenegro must register as an employer who calculates, withholds, and remits taxes to the relevant authorities on employees’ behalf. The taxes to be withheld are Personal Income Tax and Social Security Contributions that cover healthcare, pension, unemployment, and disability.

The rates of the Personal Income Tax are progressive and are applied to salaries as follows:

• Gross salaries of up to 700 EUR are tax-exempt
• Gross salaries between 701 EUR and 1,000 EUR – 9%
• Gross salaries from 1,001 EUR – 15%

Social Security Contributions are paid jointly by employers and employees. The contributions paid by employers are treated as operating costs, whereas the contributions paid by employees are deducted from gross salaries. Annual pension and disability insurance contributions are capped at 54,553 EUR, and the rest of the contributions aren’t capped.

Montenegrin employers are subject to the following rates of Social Security Contributions:

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

Employees of Montenegrin crypto companies are subject to the following rates:

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

How do I pay taxes on crypto in Montenegro in 2024?

In 2024, Montenegro continues to develop its approaches to taxing cryptocurrency income in response to the growing proliferation of digital assets. The government aims to create a fair and transparent tax system for cryptocurrency transactions, taking into account their unique characteristics and potential for the country’s economy.

Taxation of cryptocurrency income

In Montenegro, income from cryptocurrency trading and other transactions with digital assets is taxable according to general tax principles. This means that income from cryptocurrencies can be treated as capital gains or business activities and taxed depending on their nature.

Income declaration

Taxpayers are required to declare their cryptocurrency income in their annual tax return. It is important to correctly categorise the income and take into account any related expenses that may be deducted when calculating the tax base. The exchange rate of the cryptocurrency at the time of receiving the income should be used to convert the amounts into national currency.

Tax rates

• Income tax for individuals: Cryptocurrency income may be taxed at the standard income tax rate for individuals, which is up to 15% in Montenegro.
• Corporate tax: Legal entities that deal in cryptocurrencies are subject to the standard corporate tax rate of 9%.

Capital gains tax

Gains from the sale of cryptocurrencies that exceed the original acquisition cost may be subject to capital gains tax. However, the details and rates of capital gains tax should be clarified as they may change depending on current tax legislation.

VAT and other taxes

Currently, cryptocurrency transactions are not subject to VAT in Montenegro, but the tax policy may be adjusted in response to the development of the cryptocurrency market and international recommendations.

Conclusion

In general, the taxation of cryptocurrency income in Montenegro in 2024 requires careful attention to the classification of income and documentation of all transactions. Taxpayers are advised to consult with professional accountants or tax advisors to ensure compliance with tax obligations and optimise tax payments. Given the dynamic nature of the cryptocurrency market and tax laws, it is important to stay up-to-date and adapt tax strategies accordingly.

Table with the main tax rates in Montenegro

These rates reflect Montenegro’s tax policy to support economic development and attract investment. The country offers relatively low tax rates, which makes it attractive for businesses and individual entrepreneurs.

 

If you wish to realise your novel crypto project in Montenegro and are looking to optimise your taxes, our highly qualified and experienced legal consultants here at Regulated United Europe (RUE) will be pleased to assist you. We very well understand and closely monitor local and international taxation rules applicable to cryptocurrency businesses, and strive to ensure that our clients not only comply with local regulations but also operate in a tax-efficient way. Moreover, we’re more than happy to help you with the formation of a new Montenegrin crypto company, crypto licensing, and financial accounting. Book a personalised consultation now to receive comprehensive legal advice which will set the stage for your success.

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