Freelancers need to declare income received via Solar Staff on their own, because the service is not a tax agent and does not pay their tax on such income.
To carry on tax accounting in Montenegro for your Solar Staff income, you need to:
Be a tax resident
Have a tax ID number (TIN)
Opt for a tax regime
Tax residence
Montenegro's residents are taxed on their worldwide income, while non-residents are taxed on the following types of Montenegro-sourced income:
Income related to a fixed base / permanent establishment (for entrepreneurs)
Royalties
Interest
Rental income from immovable property
A Montenegro resident is an individual who:
Spends at least 183 days in a tax year in Montenegro.
Has a center of personal and economic activities in Montenegro (place of residence, family, or main economic activity).
Is sent abroad for the purpose of working for a legal entity or natural person resident of Montenegro.
Montenegro has double taxation agreements with a number of countries (full list), the provisions of which may override the applicable tax residence rules and other provisions of national legislation.
Tax ID number (TIN)
To interact with Montenegrin government authorities and pay your taxes, you need to obtain a unique identification number (jedinstveni matični broj). This number is assigned to individuals upon the receipt of an identity card (lična karta) or a residence/work permit (dozvola za privremeni boravak / rad) by the Ministry of the Interior (Ministarstvo unutrašnjih poslova). The ID number is made up of 13 digits and is printed on the back of the residence permit / identity card.
Montenegro also has a tax ID number for businesses (poreski identifikacioni broj / PIB). To obtain it, the entrepreneur needs to complete the registration procedure and then apply to the tax office at the place of registration with a filled out JPR form, identity card, certificate of registration as an entrepreneur, and a seal. PIB is assigned not only to entrepreneurs, but also to legal entities, but Solar Staff only supports the entrepreneur and self-employed individual statuses.
Taxes and contributions payable by freelancers
Tax obligations depend on the freelancer's status and/or fulfillment of certain conditions. Montenegro has two tax status options for Solar Staff freelancers to choose from:
IMPORTANT! Solar Staff does not have the option to choose a tax status for freelancers based in Montenegro, but you can fill in your tax ID in your account.
Self-employed individual
When receiving income via Solar Staff, Montenegro-based freelancers may pay income tax as a self-employed individual (income from independent activities). This status does not require any special registration. Self-employed individuals are liable to pay the following taxes and contributions:
Income tax (porez na dohodak fizičkih lica), which is calculated at a progressive rate based on the amount of annual income. Every year, the taxpayer may deduct a fixed amount of €840 and incurred expenses, as well as take advantage of tax benefits (to learn more, see articles 9, 20-21, 32, and 32a of the Law on Personal Income Tax). Income tax rates for 2023:
Annual income, € | Tax rate |
up to 8,400 | 0% |
8,401 – 12,000 | 9% |
12,001 and up | 15% |
Reporting and payment. Taxpayers are to submit a GPPFL return to the tax office online or in person by April 30 of the year following the reporting one. For instructions on filling out the return, go here. Income tax on self-employed income is paid over the course of a year in the form of monthly payments, with payments for the previous month due by the end of the current month in the amount of 1/12 of the tax liability based on the annual tax return for the previous year (for example, payment for September is made before October 31).
Local income tax depends on the place of registration of an individual and ranges from 10% to 15% of the amount of accrued tax (we recommend looking up the current rates for each municipality):
15% for Podgorica and Cetinje
13% for Bar
10% for Budva
Reporting and payment. The tax return is submitted monthly, by the 15th day of the month following the reporting one (for example, the return for August is submitted by September 15). The return form may vary slightly from municipality to municipality:
Tax return and application for Podgorica
Tax return for Budva
IMPORTANT! Freelancers who applied for a residence permit in Montenegro based on a digital nomad visa are exempt from paying income tax in Montenegro on income from foreign sources.
Value added tax or VAT (porez na dodatu vrijednost) is calculated at a rate of 21%. The obligation to register as a VAT payer arises if the turnover for the previous taxable period (calendar year) exceeds €30,000. However, taxpayers can also register for VAT voluntarily, regardless of turnover. A sample application for registering as a VAT payer is available here.
Tax accounting and payment. VAT is figured and paid every calendar month. Taxpayers need to submit a monthly VAT calculation to the tax office in person or online before the 15th day of the month preceding the VAT payment. The tax is due by the 15th of the month following the reporting one.
To learn more about VAT and its calculation and payment, see here.Social security contributions (doprinosima za obavezno socijalno osiguranje) are divided into:
Pension and disability insurance: 20.5%
Unemployment insurance: 1%
Declaring and paying contributions. Individuals calculate the amount of compulsory contributions on their own based on their gross income, and submit a monthly report on accrued and paid taxes and contributions (IOPPD) to the tax office online or in person by the 15th day of the month following the reporting one (to learn more, see the Law on Compulsory Social Insurance Contributions). Contributions are paid simultaneously with the filing of the monthly report. See here for detailed instructions on filling out IOPPD.
Entrepreneur
Entrepreneurs in Montenegro need to undergo a special registration procedure (learn more). After they register, the taxpayer needs to obtain the entrepreneur tax ID number.
When registering, entrepreneurs opt for the lump-sum system where they pay a flat tax monthly. You can switch to the lump-sum system by submitting an application under Form ZPO before December 31 of the current taxable period, or within 5 days from the date of registration.
Restrictions and requirements. To be eligible for the lump-sum taxation system, the entrepreneur must ensure their turnover for the previous taxable period (calendar year) does not exceed €18,000. If this amount is exceeded, the entrepreneur will have to pay the same income tax and VAT as the self-employed individual.
Under the lump-sum system, entrepreneurs are classified into 4 groups by type of activity (Article 3 of the Rules for Lump-Sum Taxation). Freelancers who use Solar Staff may fall into groups 3 and 4, which include such activity categories as writers, photographers, and decorators. Unfortunately, this tax system does not cover lawyers, consultants, IT specialists, and some other activities.
IMPORTANT! If the freelancer's activity falls into group 3, then they can also make use of a 35% expense deduction from income.
Entrepreneurs are also classified according to the amount of realized or planned turnover:
Group 1: Turnover of up to €6,000
Group 2: Turnover of up to €12,000
Group 3: Turnover of up to €18,000
The amount of flat tax and compulsory insurance contributions is calculated by the tax authority based on the entrepreneur's turnover and type of activity (to learn more, see Article 5 of the Rules for Lump-Sum Taxation).
Reporting and payment. Entrepreneurs must keep a book of income and expenses (you can see a sample one in an annex to the Rules for Lump-Sum Taxation). With the tax authority's permission, you can keep the income and expenses book in electronic form, with no additional tax returns necessary. The tax is due monthly, with the tax for the previous month paid before the end of the current one in the amount of 1/12 of the tax liability determined by the tax authority.
If an entrepreneur voluntarily registers as a VAT payer, they pay VAT the same way as self-employed individuals.
Additional information
Official website of the Government of Montenegro (Vlada Crna Gora)
Ministry of the Interior (Ministarstvo unutrašnjih poslova)
Revenue and Customs Administration (Uprava prihoda i carina)
Online portal for interacting with the Revenue and Customs Administration
Montenegro's Central Registry of Commercial Entities (centralni registar privrednih subjekata)
Registry of VAT payers
Sample forms for the main freelancer documents
Income received via Solar Staff is declared using certificates and invoices, and in accordance with the offer agreement
If you have any questions, get in touch via the chat in your Solar Staff account or email us at [email protected].