Incentives for investors in the tourism sector in Montenegro

Тourism is of inestimable importance for Montenegro. It bears on every aspect of our society, our economic development, standard of living and the Montenegrin way of life. Travel and tourism has played a central role in Montenegro’s dramatic growth and transformation. Tourism is the most important export sector in Montenegro, with a share of some 25% of the total Gross Domestic Product (GDP) and a strong tendency toward growth. Montenegro is a destination offering a variety of attractions and all-year tourism.

To improve the use of major resources and bring in new investment, tax reform policy has introduced fiscal incentives for investing in the following sectors: high-quality tourism - 5-star hotels; food production, other than primary agricultural production, and capital investment in the energy sector. In order to remove business barriers and encourage high quality tourism, the following incentives have been provided:

1. Zero VAT rate in accordance with the Law on Value Added Tax is paid for 10a) delivery of products and services for construction and equipment of catering facilities of five and more stars, construction of energy facilities for electricity production with installed capacity greater than 10 MW and facilities for production of food products classified within sector C group 10 of the Law on Classification of Activities ("Official Gazette of Montenegro", No. 18/11), whose investment value exceeds EUR 500,000.

2. Tax reliefs pursuant to Article 12 of the Law on Real Estate Tax (“Official Gazette of Montenegro”, No. 025/19) define that for catering facilities the tax rate may be reduced in relation to the tax rate determined in accordance with Article 9 of this Law for catering facilities of category 3 stars up to 15%, for catering facilities of category 4 stars up to 30% and catering facilities of category over 4 stars up to 70%. After the payment of corporate income tax, business entities operating in Montenegro have the opportunity to transfer funds to their accounts abroad at the end of the year.

3. VAT is calculated and paid at a reduced rate of 7% of turnover of products, services and imports of products, as follows: for accommodation services in hotels, motels, tourist resorts, boarding houses, camps, tourist apartments and villas; preparation and serving of food, beverages and drinks, except alcoholic beverages, carbonated beverages with added sugar and coffee, in catering facilities; public transport services for passengers and their personal luggage;

4. Exemption from payment of utility fees for high category hotels.

For the construction of a hotel with at least four stars, in accordance with the Law on Spatial Planning and Construction of Facilities ("Official Gazette of Montenegro", No. 64/2017, 44/2018, 63/2018, 11/2019 and 82/2020) the investor is exempt from payment of fees for communal equipment of construction land. If the hotel operates according to the condo or mixed business model, the investor is obliged to pay a fee for communal equipment of construction land, for accommodation units that are the subject of individual sales, for the net area of accommodation units with parking space.

For the registration of accommodation units that are the subject of individual sale in the real estate cadastre, in addition to the documents prescribed by the law governing the real estate cadastre, a document on the regulation of relations regarding the payment of fees for communal equipment of construction land is required.

For hotels that are subject to exemption from the payment of the fee for communal equipping, the temporary exemption from the payment of the fee is made on the basis of checking the fulfillment of the required categorization by the auditor in the process of revision of technical documentation. The final exemption from the payment of the fee is made on the basis of the categorization of the facility determined in accordance with the law which regulates the conditions for performing tourist and catering activities.

In the G list of the real estate cadastre, a note is entered that the building is exempt from paying the fee for communal equipping of construction land, ie that the fee has been reduced, stating the grounds for exemption, or reduction.