n November 2023 the Government of Montenegro proposed amendments to the CIT Law (Proposal).
Currently undergoing public debate, the Proposal is designed to bring the Montenegrin tax framework in line with EU tax legislation, particularly focusing on the EU Council’s Directive 2009/133/EC. This directive outlines a unified taxation system applicable to mergers, divisions, asset transfers, and share exchanges involving companies from different EU member states. The proposed changes will also accommodate the transfer of registered seats from one member state to another, with application deferred until Montenegro’s accession to the EU.
The primary objectives of the Proposal extend beyond alignment with EU standards, as it seeks to introduce changes and enhance harmony between the CIT Law and other legislative provisions, thereby mitigating the potential for abuse.
In its broader scope, the Proposal aims to foster greater cohesion between the CIT Law and other legislative frameworks.
The public debate period is until 12 December 2023, providing stakeholders with an opportunity to engage in the discourse. If approved, the Proposal will enter into force on 1 January 2024.
Some of the key changes that the Proposal introduces:
- Capital Gain Tax Base
The Proposal contemplates a change in the definition of capital gain, deleting a clarification that the capital gain may result only from the transfer “with consideration”. The Proposal now aims at expanding the scope of the transactions subject to capital gains tax by envisaging that capital gains represent an income realised from sale or other transfer of assets (regardless of whether it was made with consideration or not).
Under the Proposal, the tax authority will be enabled to adjust the selling price of assets to the market value of assets if the sale price is lower than the market in transactions between related but also unrelated parties.
- Subsidy Rules Adjustments
The Proposal advocates for the removal of specific subsidies from the CIT Law. However, it is important to note that this adjustment is not an elimination of subsidies altogether but rather addresses the duplication of subsidies. These subsidies are already provided for in other laws such as 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.
By Branimir Rajsic, Senior Consultant, and Aleksa Tomanovic, Junior Associate, Karanovic & Partners