On 29 December 2023, the National Assembly of Montenegro adopted amendments to the CIT Law (Amendments). Amendments came into force on 1 January 2024.
These Amendments bring the Montenegrin tax framework in line with EU tax legislation, particularly focusing on the EU Council’s Directive 2009/133/EC, which outlines a unified taxation system applicable to mergers, divisions, asset transfers, and share exchanges involving companies from different EU member states. The changes will also accommodate the transfer of registered seats from one member state to another. The application of these provisions is deferred until Montenegro’s accession to the EU.
Additionally, the Amendments introduce additional changes to the CIT regime. Some of the key changes are:
- CIT base
The Amendments precise that the CIT base is determined by adjusting the profit before taxation from the balance sheet prepared in accordance with the accounting rules, IAS and IFRS.
Additionally, the amendments envisage that the effects of changing of the accounting policies resulting in correction of certain positions in the books will be recognized as income or expense, as of the tax period in which such correction was made. This income or expense will be recognized in equal portions in five tax periods.
It is also clarified that income from liquidation proceeds of other legal entities will not be included in the CIT base.
Finally, the Amendments further specify the terms for write-offs.
- Capital gains
The Amendments prescribe detailed rules for determination of the acquisition value of the assets. Additionally, the amendments allow that the tax authority will be enabled to adjust the selling price of asset to the market value of assets if the sale price is lower than market in transactions between related but also unrelated parties.
- Withholding tax
The Amendments introduce a change in the definition of the taxpayer of withholding tax. In particular, the Amendments aim to expand the scope of taxpayers of withholding tax by defining the taxpayers as legal entities. Also, the Amendments introduce a new subject of withholding tax – distribution of the liquidation surplus. Additionally, according to the new Amendments, permanent establishment is also obliged to pay withholding tax on, among others, payments of dividends, profit and liquidation surplus.
- New amortisation rates
New amortisation rates came into force and are now as follows:
- Group I (buildings, roads, bridges, parks, powerplants, etc.) – 2.5% (before it was 5%),
- Group II (cars, boats, elevators, medical equipment, office supplies, buses, etc.) – 10% (remained the same),
- Group III (trucks, certain machines and facilities, radars, etc.) – 15% (before it was 20%),
- Group IV (equipment for oil drilling, mining, spare parts for planes, etc.) – 20% (before it was 25%), and
- Group V (computers, software) – 30% (remained the same).
- Subsidy Rules Adjustments
The Amendments remove the subsidy for newly employed from the CIT Law, as it is already provided for in the Personal Income Tax Law.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.
