Montenegro's Tax Harmonisation with the EU

By the spring of 2026, Montenegro has reached a decisive stage in its negotiations to join the European Union. Of the thirty-three negotiating chapters, thirteen have been provisionally closed, and the government of Prime Minister Milojko Spajić has publicly committed to closing the remaining chapters in 2026 and becoming the EU's 28th member state by 2028. One of the chapters that still remains open and requires substantial further work is Chapter 16 — Taxation.

This article closes our cycle on Montenegro's legal and constitutional system. It draws together the threads developed across the previous sixteen pieces: the tax system itself, the wider economic context, and the foreign-policy commitment to European integration. Here we examine what "harmonisation" of taxation with EU law actually means, what has already been achieved, what remains to be done, and — most importantly — what these changes mean for foreigners who run businesses or own property in Montenegro.

What "Harmonisation" Means in Tax

It is worth dispelling a common fear at the outset: EU membership does not require Montenegro to abandon its low tax rates. The EU does not mandate full unification of national tax systems. Taxation remains one of the few areas where Council decisions are taken unanimously — precisely to protect each member state's fiscal sovereignty.

Harmonisation, in this context, means coordination. A member state retains the right to set its own rates and to introduce new forms of taxation, but it must align certain structural elements with EU law: the tax base, place-of-supply rules, information-exchange procedures, technical systems. The objective is not to strip away national tax autonomy, but to remove barriers to the single market and to close cross-border avoidance loopholes.

This distinction matters greatly for Montenegro. The 9–15% corporate income tax, low social contributions, and absence of any municipal corporate income tax form a competitive advantage that the country has no intention of giving up upon accession. Those parameters will remain under national control. What changes are other, less visible but more structural elements: how the tax base is calculated, how tax authorities exchange data, how VAT payers are identified, which transactions become taxable, and which long-standing reliefs are phased out.

Chapter 16: Where Montenegro Stands

Negotiations on Chapter 16 — Taxation were formally opened on 30 March 2015 at an Intergovernmental Conference in Brussels. The chapter is divided into four sub-areas: indirect taxation (VAT and excise duties), direct taxation, administrative cooperation and mutual assistance, and the operational capacity of the tax administration.

The European Commission has set three closing benchmarks. The first requires Montenegro to adopt legislation in areas still requiring alignment — particularly VAT, excise duties, and direct taxation — and to submit to the Commission a detailed plan for achieving full alignment with the acquis communautaire by the date of accession. The second requires sufficient administrative capacity and infrastructure at both central and local tax offices to apply and enforce tax legislation, including a fully staffed and operational Central Liaison Office (CLO) and Central Excise Liaison Office (CELO). The third requires demonstrable progress in developing the tax administration's IT systems — most importantly the connections to VIES (the EU's VAT Information Exchange System), EMCS (the Excise Movement and Control System), and the IT systems for direct-tax cooperation.

The European Commission's 2024 Report on Montenegro classified the country as moderately prepared in the area of taxation. Limited progress was noted in further aligning excise duty, VAT, and corporate income tax legislation with the acquis. The separation of the Tax Administration from the former Revenue and Customs Administration (Uprava prihoda i carina) entailed organisational changes that slowed the development of administrative capacity and required infrastructure.

The pace has since accelerated. Across 2025 and early 2026, Montenegro enacted a substantial package of changes, to which we now turn.

VAT Reform: What Changed in 2026

On 2 February 2026, the Parliament of Montenegro (Skupština) adopted comprehensive amendments to the Law on Value Added Tax, designed specifically to advance the closure of Chapter 16. The aim is further convergence with Council Directive 2006/112/EC, the cornerstone of the EU VAT system.

Construction land becomes subject to VAT

The most visible change for the real-estate market: the sale of construction land — defined as land for which a construction permit has been issued — now constitutes a taxable supply of goods and is subject to VAT at the standard rate of 21%. Under the previous version of the law, the transfer of any land, including construction land, was exempt from VAT.

Land on which a building has already been erected is treated as an integral part of the supply of the newly constructed building.

A new VAT number with the "ME" prefix

All VAT payers receive a new identifier consisting of the country prefix "ME" and the existing tax identification number (PIB/TIN). The purpose is to simplify the identification of Montenegrin taxpayers within the EU's VIES (VAT Information Exchange System) — the search tool through which a business in any EU member state can verify the validity of its counterparty's VAT number. VIES will be linked to the new national IRMS (Integrated Revenue Management System) platform, which went live in January 2026 and is accessible at irms.tax.gov.me.

Without integration into VIES, Montenegrin VAT payers would not be able to participate properly in intra-Union transactions after accession — which is why this technical bridge has been built well in advance.

Place-of-supply rules fully aligned with the Directive

The rules for determining the place of supply of services are now fully aligned with Directive 2006/112/EC. This is a technical but consequential amendment for everyone who supplies or receives services across borders.

A new consequence has been introduced: where the place-of-supply rules locate a service in Montenegro, a non-resident supplier must either open a branch in Montenegro or appoint a local VAT representative to act as the VAT payer. Under the previous regime, when a non-resident without a Montenegrin branch supplied services whose place of supply pointed to Montenegro, the recipient automatically became the VAT payer under the reverse-charge mechanism, with no registration obligation on the supplier. This was a significant simplification for foreign IT companies and freelancers providing one-off services to Montenegrin clients.

Stricter bad-debt relief

The VAT relief on bad debts is now subject to stricter evidentiary requirements. To claim it, a creditor must demonstrate that its claim has not been fully satisfied in insolvency, insolvency reorganisation, or enforcement proceedings, and that court proceedings to recover the debt were initiated before the commencement of the insolvency or reorganisation. The previous rules were less formalised.

Transfer of a Going Concern (TOGC)

The rule that the transfer of an entire business or a portion of it as a going concern does not constitute a taxable supply of goods remains in force, provided the transferee is — or becomes as a result of the transfer — a registered VAT payer and continues the same taxable activity. However, a new provision has been added: if the transferee subsequently uses the transferred assets for purposes incompatible with the right to deduct input VAT (for example, by terminating the activity or shifting to an exempt activity with no right of deduction), it must reverse-charge VAT on the value of the assets received.

Clawback rules — adjustments to previously deducted input VAT on capital assets (equipment, business real estate) where the circumstances of use subsequently change — have also been clarified.

Corporate Income Tax: Preparing for EU Directives

In December 2023, the Skupština adopted an important package of amendments to the Law on Corporate Income Tax, effective from 1 January 2024. The amendments are designed to align Montenegrin rules with Council Directive 2009/133/EC — the directive establishing a common system of taxation for mergers, divisions, transfers of assets, and exchanges of shares between companies of different EU member states, as well as the transfer of a company's registered office within the Union.

A distinctive feature of the Montenegrin approach: provisions that directly implement Directive 2009/133/EC will activate upon Montenegro's accession to the EU. This "dormant law" technique is common in pre-accession drafting — the statute is already enacted and legally exists, but lies inert until the moment of membership. For businesses, it is worth knowing that after accession, cross-border reorganisations within EU groups involving Montenegrin companies will be eligible for the tax-deferral mechanism applicable in any other member state.

Beyond the M&A block, the amendments also tightened the calculation of the corporate income tax base. The base is now built from profit before taxation as reported in financial statements and must strictly follow IAS/IFRS. Any income or expense arising from changes in accounting policy is recognised in the period of correction and spread evenly over five tax periods. Income from the liquidation of other legal entities is excluded from the tax base, and the conditions for debt write-offs have been refined.

The progressive corporate income tax rates themselves are unchanged: 9% on profit up to €100,000, 12% on profit between €100,000 and €1,500,000, and 15% on profit above €1,500,000. This remains competitive even after accession — the EU average corporate tax rate is considerably higher.

The Global Minimum Tax: Pillar Two in Montenegro

Alongside the VAT reform, from 1 January 2026 Montenegro has enacted the Law on Global Minimum Corporate Income Tax (Zakon o globalnom minimalnom porezu na dobit pravnih lica). This is Montenegro's implementation of the international Pillar Two regime developed by the OECD/G20 (the GloBE rules) and, at the same time, alignment with Council Directive (EU) 2022/2523 on a global minimum level of taxation for multinational groups.

Montenegro's version is structured as a Qualified Domestic Minimum Top-up Tax (QDMTT) — a national top-up tax that raises the effective tax rate of a large group to 15%. Unlike most EU member states, Montenegro has not introduced an Income Inclusion Rule (IIR) or an Undertaxed Profits Rule (UTPR). This is a deliberate choice in favour of a simpler architecture.

The law applies to constituent entities of multinational enterprise groups and large-scale domestic groups whose consolidated annual revenue at the level of the ultimate parent reaches €750 million or more in at least two of the four fiscal years immediately preceding the tested year. Under the de minimis rule, the tax does not apply where the average revenue of constituent entities in Montenegro is below €10 million and total profit is below €1 million.

Excise Duties, Information Exchange, and BEPS

Convergence with EU law is also progressing on other, less visible fronts.

Excise duties and EMCS. Montenegro must connect to the Excise Movement and Control System — the EU-wide electronic system for tracking the movement of excise goods (alcohol, tobacco, energy products) under duty-suspension arrangements. Without EMCS, normal trade in excise goods within the Union is impossible. Work on aligning excise legislation with the acquis is proceeding in parallel with the VAT reform.

Fiscalis. Since 2015, Montenegro's Tax Administration has participated in the EU's Fiscalis programme — a tax-administration cooperation programme through which national officials receive training, exchange experience, and jointly develop trans-European IT systems. This is an investment in human and technological capital intended to ensure operational readiness by the moment of accession.

The BEPS Multilateral Convention (MLI). On 12 November 2025, Montenegro signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, and ratified it on 27 December 2025. Once the necessary formal steps have been completed and the instruments deposited, the Convention will enter into force and automatically modify more than fifty of Montenegro's bilateral double-tax treaties, inserting standard anti-avoidance provisions.

Treaty with Liechtenstein. On 25 September 2025, Montenegro and the Principality of Liechtenstein signed a Convention for the Elimination of Double Taxation with respect to taxes on income and on capital, and the prevention of tax evasion and avoidance. This is part of a sustained expansion of Montenegro's tax-treaty network — another sign that the country is preparing its tax infrastructure for deeper integration into global and European flows.

What This Means for Business in Montenegro

Bringing the picture together for different types of clients:

Small businesses and individual entrepreneurs. The corporate income tax rates (9–15%) and personal income tax rates remain unchanged — this is the "low-tax Montenegro" that attracts entrepreneurs. New reporting and process obligations are emerging, however: the new ME-VAT number, the mandatory reverse-charge clause on invoices for services with a place of supply outside Montenegro, and tighter oversight through the IRMS platform. Expect the tax administration to react more actively to data discrepancies over 2026–2027, since IRMS centralises all taxpayer information.

Companies working with foreign counterparties. The priority is to review contracts for cross-border services. The new place-of-supply rules mean that some transactions previously taxed under the recipient's reverse charge now require the foreign supplier to register in Montenegro or to appoint a tax representative. This applies in particular to digital services, data-processing services, and the supply of information when provided to non-VAT-registered persons.

Real-estate buyers and sellers. The introduction of VAT on construction land is the most tangible change for the expatriate community. If you plan to buy a plot for development, factor in an additional 21% on top of the price (where the transaction is not neutralised by an input-VAT deduction). If you plan to sell land with an active construction permit, work through the tax consequences with an adviser. Procedural details for a transaction are covered in our guide to buying real estate.

Large international groups. If a Montenegrin company forms part of a group with consolidated revenue above €750 million, the GMCIT will apply. For everyone else the regime is irrelevant — but it is worth remembering that the QDMTT declaration may be substantially simplified where safe harbours are available or where the de minimis conditions are met.

Anyone dealing with double-taxation issues. Once the BEPS MLI enters into force, most of Montenegro's double-tax treaties will be modified in important ways: a principal purpose test (PPT), anti-treaty-shopping rules, updated permanent-establishment provisions. Tax planning that relies on Montenegrin structures together with foreign holding entities will need to be reassessed.

The Road Ahead: A Map to 2028

As of May 2026, Chapter 16 remains open, but both the direction and the pace are clear. Prime Minister Spajić has publicly called 2026 "the most decisive year" in Montenegro's European-integration path. In April 2026, the EU approved the creation of an ad hoc working party to draft the Accession Treaty — a formal signal that the finish line is approaching.

In the foreseeable period, further amendments to the VAT Law and the Excise Duties Law are to be expected, aimed at full alignment with the acquis, together with strengthening of administrative infrastructure: full staffing of the CLO and CELO, and technical connection to VIES and EMCS. The detailed plan for full alignment by the date of accession is itself one of the closing benchmarks, and its submission to the Commission will be among the final formal steps before the chapter is closed.

For businesses, the sensible strategy is not to wait for accession, but to adapt processes now: update invoice and contract templates, verify that the correct VAT number is in accounting systems, review arrangements with foreign counterparties, assess how the new construction-land rules apply to current projects. The changes have already happened — they have been in force since 2026, and the tax administration is already operating within the new architecture.

Closing the Cycle

This article concludes our seventeen-part cycle on Montenegro's legal and constitutional system. We have traced a path from the theoretical foundations of law through the Constitution, the Parliament, and the President, through the judicial system and local self-government, through the electoral system and the Ombudsman, through foreign policy and the economy — to the current reform of taxation on the threshold of EU membership.

The sequence is not arbitrary. Tax harmonisation is the point at which all the major threads of the cycle converge. Constitutional foundations determine which acts and procedures may introduce taxes. Parliament adopts amendments and ratifies international conventions. The Government conducts negotiations with the EU and prepares alignment plans. The judiciary — including the Constitutional and Administrative Courts — resolves disputes between taxpayers and the administration. The foreign-policy course towards the EU shapes the substance of the reforms. The economic model of the country determines which compromises are politically feasible and which are not.

Montenegro is a small state that, over the two decades since independence, has built a functioning legal system, adopted the euro, joined NATO, and approached EU membership. The 2026 tax reform is one of the last major steps on that path. Understanding how this system works helps foreigners — whether residents, property owners, or entrepreneurs — to act with awareness of the context in which they operate.

Sources

• •Council of the EU, Press release, EU and Montenegro provisionally close another chapter in accession negotiations, 26 January 2026
• •European Commission, Montenegro 2024 Report, Chapter 16 — Taxation
• •EUME (Government of Montenegro EU integration portal), Chapter 16 – Taxation
• •BDK Advokati, Montenegro further harmonizes its VAT regime with EU VAT Directive, 23 February 2026
• •Karanović & Partners, Montenegro Introduces Global Minimum Tax, VAT Amendments and New Tax Treaty, December 2025
• •PwC Tax Summaries, Montenegro — Corporate Taxes, 2026
• •Council Directive 2006/112/EC on the common system of value added tax
• •Council Directive 2009/133/EC on the common system of taxation applicable to mergers, divisions and transfers of assets
• •Council Directive (EU) 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups
• •Law on Value Added Tax of Montenegro (as amended on 2 February 2026)
• •Law on Global Minimum Corporate Income Tax of Montenegro (in force since 1 January 2026)