On July 9, 2026, Montenegro’s Parliament unanimously approved a new Value Added Tax (VAT) Law, with 48 deputies voting in favor. This law replaces an existing framework that has undergone numerous amendments since its inception in 2002. A key aspect of this legislation is its activation date, which is contingent upon Montenegro’s accession to the European Union, as outlined in Article 215.
This new law does not immediately alter tax rates or exemptions; the current VAT system will remain operational until the country officially joins the EU. Businesses are advised to continue adhering to existing invoicing and registration requirements while preparing for significant changes associated with cross-border transactions. The new framework maintains the standard VAT rate at 21%, along with reduced rates of 15% and 7%, and sets a registration threshold at €30,000.
In aligning with EU regulations, the new VAT Law incorporates the common VAT framework established by Council Directive 2006/112, along with subsequent updates related to VAT digitalization. It also includes provisions for refunds to taxable entities based in other countries.
The delayed implementation of this law is primarily due to its reliance on EU membership for effective operation. Many provisions depend on integration within the EU’s fiscal territory and access to its information systems. Key concepts such as intra-Community acquisition and automated tax administration cooperation cannot function fully while Montenegro remains outside the EU.
For importers, this transition will be particularly significant. Currently, trade with EU member states is classified as import/export activity, necessitating customs declarations and import VAT. Post-accession, goods exchanged between Montenegro and other member states will generally be treated as intra-EU supplies, eliminating customs borders but shifting tax controls to invoices and electronic data exchanges.
This change may enhance liquidity for businesses, as they would no longer need to finance import VAT at borders for qualifying intra-EU acquisitions. However, it also places greater responsibility on company accounting systems; errors such as missing VAT numbers or incorrect supply analyses could lead to liabilities long after goods have been delivered.
Particular sectors such as tourism, digital services, and real estate transactions may encounter unique challenges under the new VAT regime. Given that a significant portion of Montenegro’s economy involves services provided to non-residents, European VAT rules will dictate tax liability based on detailed criteria including transaction type and customer status.
The legislation prepares for advancements in electronic invoicing and digital reporting, which are expected to bolster the Tax Administration’s ability to detect fraud and inconsistencies in tax reporting. This shift will also necessitate stricter bookkeeping practices post-reporting deadlines.
The Tax Administration has recognized that implementing these changes will require significant adjustments to its processes and IT systems. Finance Minister Novica Vuković informed Parliament that the previous VAT framework was inadequate for supporting a growing digital economy and cross-border trade.
Private sector entities will also need to adapt their enterprise software to differentiate between domestic transactions and intra-EU supplies. They must ensure compliance with new reporting requirements and maintain evidence necessary for zero-rating. Retailers and online vendors will have to familiarize themselves with distance-selling regulations, while accountants will need to reconcile invoices with data accessible by tax authorities in other member states.
Recent amendments made in February have already integrated qualifying construction land into the VAT system and revised rules regarding VAT numbers for non-residents. These changes remain effective under the new law, as confirmed by the Tax Administration.
Montenegro’s proactive approach in establishing a fiscal operating system ahead of its EU membership is viewed as prudent; however, it poses a risk of complacency regarding preparation efforts. Changes to accounting software, contractual obligations concerning taxes, and employee training must begin well before accession rather than waiting until the last moment.
