The COVID-19 pandemic has hit hospitality, tourism, trade and service industries the hardest — sectors on which a significant part of the Montenegrin economy depends. In the debate about the way to recovery, a proposal often appears for a temporary reduction of the corporate profit tax rate as a measure to support the economy.
Why the 3% proposal?
The current corporate profit tax rate in Montenegro is 9% (with a progressive scale for larger profits). Lowering that rate to a symbolic 3% for a certain period would aim to:
- Relieve current business operating costs
- Preserve existing jobs
- Encourage new investments and the opening of companies
- Strengthen Montenegro’s competitiveness compared to the region
Arguments for lowering the rate
- Company liquidity — a lower tax burden means more available capital for salaries, inventory and investment
- Signal to investors — tax competitiveness attracts foreign capital
- Reduction of the grey economy — a lower nominal rate reduces the incentive to hide revenues
Arguments against
- Decline in budget revenues at a critical moment, when the state is most indebted for the healthcare system and social protection
- Risk of permanent disruption of the fiscal framework — a temporary measure often becomes permanent
- Uneven benefits across sectors — those without profit will have no direct benefit
Finance, tax and consulting — the Finance Plus view
It is crucial that any tax reform is analyzed through the prism of long-term budget sustainability and economic competitiveness. Finance Plus, as an accounting and tax consultant, continuously monitors legislative changes and provides clients with timely recommendations for optimizing tax obligations — within the framework of applicable regulations.
Do you need an analysis of your business’s tax burden? Contact us for an individual assessment.
