What Montenegro's 9% Corporate Tax Really Means

For international corporations and digital entrepreneurs engaged in aggressive tax planning, Montenegro holds one of the most competitive tax rates on the European continent. While standard European corporate tax rates hover between 20-30%, Montenegro’s progressive tax system, starting at just 9%, provides massive fiscal leverage. But how exactly does this 9% work in practice?

Montenegro Profit Tax (Corporate Tax) Rates: The Progressive System

As of 2022, Montenegro abandoned a strict flat-tax system in favor of a progressive scale intended to favor SMBs and startups while still remaining highly attractive for larger corporations. The current tax brackets are:

Calculation Example 1 (Small Business): If your company concludes the fiscal year with a 'net profit' of 80,000 Euros (after all expenses, salaries, setups are deducted), your corporate tax liability is exactly 80,000 x 0.09 = 7,200 Euros.

Calculation Example 2 (Scaling Tech Business): If your company makes 150,000 Euros in net profit, you pay 9,000€ for the first 100K. For the remaining 50K, you pay 12% (6,000€). Your total tax is 15,000€, resulting in a highly effective overall tax burden of just 10%.

The Value Added Tax (VAT / PDV) Threshold

The standard VAT (PDV in Montenegrin) rate is 21%, with a reduced rate of 7% for specific hospitality and essential sectors. However, there is a golden rule for small and international service businesses:

If your annual domestic turnover within Montenegro does not exceed 100,000 Euros, you are not obligated to register for the VAT system. You can issue 0% VAT invoices.

Crucially, if you are exporting services (such as IT consulting, marketing, design) to clients strictly outside of Montenegro (e.g., US, UK, or Germany), these B2B export sales are generally VAT exempt and do not count heavily toward domestic limits.

Withholding & Dividend Tax (Extracting the Cash)

The most common question from founders is: 'How do I legally transfer company money to my personal bank account?'

Once the corporate tax is cleared, if you wish to distribute the remaining net profit to yourself as a shareholder dividend, the Montenegrin state exacts a 15% Withholding/Dividend Tax (recently raised from 9% in sweeping fiscal reforms).

Business Deductions & Optimizing the Corporate Treasury

Because of the dividend tax, savvy business owners optimize their corporate setup by making the DOO absorb legitimate business expenses before arriving at net profit. Montenegrin law permits expensing:

• Vehicle purchases, operative leasing, fuel, and municipal parking.
• Business travel, flights, and global accommodation.
• Computers, office equipment, cloud subscriptions, and telephony.
• Business representation meals and entertaining clients (subject to specific thresholds).

Conclusion: A Smart-Tax Jurisdiction, Not an Offshore Trap

Montenegro is not a shadowy 'offshore' haven. It is a strictly regulated, EU-candidate “onshore” jurisdiction adhering to absolute transparency, while deliberately utilizing low corporate rates to attract fierce entrepreneurial talent.