Authored by the expert who managed and guided the team behind the Montenegro Property Pack
Everything you need to know before buying real estate is included in our Montenegro Property Pack
Montenegro offers a relatively favorable tax environment for property investors compared to many European countries.
The country imposes moderate property taxes, straightforward capital gains and rental income tax rates of 15%, and reasonable transaction costs that make it an attractive destination for foreign property investment.
If you want to go deeper, you can check our pack of documents related to the real estate market in Montenegro, based on reliable facts and data, not opinions or rumors.
Montenegro maintains competitive property tax rates with annual property taxes ranging from 0.25% to 1% of cadastral value, 15% flat rates for both rental income and capital gains taxes, and transfer taxes starting at 3% for properties under €150,000.
Foreign investors face no major ownership restrictions for most property types and can benefit from various deductions and exemptions, particularly for primary residences and family transfers.
| Tax Type | Rate/Details | Key Features |
|---|---|---|
| Annual Property Tax | 0.25% - 1% of cadastral value | Municipality-set rates, paid in two installments |
| Transfer Tax (Resale) | 3% up to €150k, then progressive | Due within 15 days of contract |
| VAT (New Properties) | 21% | Built into developer pricing |
| Rental Income Tax | 15% on net income | 30-70% expense deductions allowed |
| Capital Gains Tax | 15% on profit | Primary residence exemption available |
| Tourist Tax | €0.10 - €1 per day per adult | Applies to short-term rentals |
What are the current property tax rates in Montenegro?
Montenegro charges annual property tax rates between 0.25% and 1% of the cadastral (market) value for most residential properties.
Local municipalities set the exact rates within this range and can adjust them by 25% to 150% based on specific factors like location, property age, and proximity to the sea. Coastal properties and those in tourist areas typically face higher rates within the allowable range.
As of September 2025, most residential properties in Montenegro pay annual property taxes closer to the lower end of the spectrum, with the average rate being around 0.4% to 0.6% of cadastral value. Properties in prime coastal locations like Budva or Kotor may reach the 1% maximum rate.
The tax is paid in two installments annually - by June 30th and October 31st - after property owners receive their assessment notice before April 30th.
What property taxes do foreign investors need to know about in Montenegro?
Foreign property investors in Montenegro face the same tax obligations as domestic owners, with no additional penalties or discriminatory rates.
The main taxes include the annual property tax (0.25%-1% of cadastral value), transfer tax on property purchases (3% for properties under €150,000), and VAT at 21% for new construction purchases. Foreign investors must also obtain a Montenegrin tax identification number (TIN) before completing any property transaction.
Rental income from Montenegro properties is taxed at 15% on net income, regardless of the owner's nationality. If you operate short-term rentals like Airbnb with annual revenue exceeding €30,000, you'll pay an additional 15% VAT plus tourist taxes ranging from €0.10 to €1 per day per adult guest.
It's something we develop in our Montenegro property pack.
Foreign investors should budget for closing costs including legal fees (~1% of property value), notary fees, and real estate agent commissions (3-5% each for buyer and seller).
Does Montenegro have capital gains tax on property sales?
Montenegro imposes a 15% capital gains tax on profits from property sales, calculated on the difference between sale price and acquisition costs plus improvements.
The tax applies to the net gain, which equals the sale price minus your original purchase cost, capital improvements, and purchase-related expenses like legal fees and transfer taxes. You can deduct documented renovation costs, major repairs, and other property improvement expenses from your taxable gain.
Several exemptions exist for capital gains tax in Montenegro. Sales of your primary residence are completely exempt from capital gains tax. Transfers between spouses, parents and children, and property transfers due to divorce or inheritance also qualify for exemptions.
Property owners must file capital gains tax returns and pay the 15% tax within the standard annual tax filing deadline. Keeping detailed records of all purchase costs, improvements, and sale-related expenses is essential for accurate tax calculation and potential deduction claims.
How does Montenegro's property tax system compare to other European countries?
Montenegro offers significantly lower property tax burdens compared to most Western European countries, making it an attractive destination for property investment.
| Country | Annual Property Tax | Transfer Tax | Income/Capital Gains Tax |
|---|---|---|---|
| Montenegro | 0.25% - 1% | 3% - 6% (progressive) | 15% flat rate |
| France | 0.5% - 1.5% | 5.8% - 7.5% | 19% - 34% |
| Germany | 0.26% - 0.35% | 3.5% - 6.5% | 26.375% - 28% |
| Spain | 0.4% - 1.1% | 6% - 11% | 19% - 23% |
| Italy | 0.4% - 1.06% | 2% - 9% | 23% - 26% |
| Croatia | No annual tax | 3% - 5% | 12% - 18% |
Montenegro's 15% flat rate for both rental income and capital gains taxes is substantially lower than progressive tax systems in countries like France or Germany, where rates can exceed 30%. The simplified tax structure also reduces compliance complexity compared to countries with multiple tax brackets and varying regional rates.
What are the income tax rates for rental properties in Montenegro?
Montenegro charges a flat 15% income tax rate on net rental income from all types of rental properties, including long-term residential leases and short-term vacation rentals.
The 15% tax applies to your net rental income after deducting allowable expenses such as property management fees, maintenance costs, repairs, insurance, and advertising expenses. For long-term rentals, you can typically deduct up to 30% of gross rental income as standard expenses. Short-term registered rentals may qualify for higher deduction rates of 50% to 70%.
Short-term rental operators with annual revenue exceeding €30,000 must also pay 15% VAT on their rental income, effectively increasing the total tax burden. Additionally, tourist taxes of €0.10 to €1 per day per adult guest apply to short-term rentals, which you collect from guests and remit to local authorities.
Rental income taxes are reported and paid annually through Montenegro's tax filing system. Property owners must maintain detailed records of all rental income and expenses to support their tax calculations and deduction claims.
Are there tax exemptions or breaks for property owners in Montenegro?
Montenegro provides several significant tax exemptions and breaks that can substantially reduce property-related tax burdens for eligible owners.
- Primary residence exemption: Sales of your main home are completely exempt from the 15% capital gains tax, regardless of the profit amount or ownership duration.
- Family transfer exemptions: Property transfers between spouses, parents and children, and inheritance transfers are exempt from both capital gains tax and transfer taxes.
- Divorce-related transfers: Property transfers resulting from divorce proceedings qualify for capital gains tax exemptions.
- Expense deductions: Rental property owners can deduct 30% to 70% of rental income as standard expenses, depending on rental type and registration status.
- Improvement cost deductions: All documented capital improvements, major repairs, and property enhancement costs can be deducted from capital gains calculations.
Municipalities may also offer reduced property tax rates for certain categories of properties or owners, such as senior citizens, disabled persons, or properties in designated development zones. These local exemptions vary by municipality and can reduce annual property taxes by 25% to 50%.
What are the costs of transferring property ownership in Montenegro?
Property transfer costs in Montenegro vary significantly based on property value and whether you're buying new construction or resale properties.
For resale properties, transfer tax follows a progressive structure: 3% for properties valued up to €150,000, then €4,500 plus 5% on the amount between €150,001 and €500,000, and €22,000 plus 6% on amounts exceeding €500,000. This means a €300,000 resale property would incur €12,000 in transfer taxes.
New construction purchases are subject to 21% VAT instead of transfer tax, but this is typically built into the developer's pricing. Additional closing costs include legal fees (approximately 1% of property value), notary fees (minimal amounts), and real estate agent commissions (3-5% each for buyer and seller).
It's something we develop in our Montenegro property pack.
Transfer tax payments are due within 15 days of signing the purchase contract. Total transaction costs for a typical resale property purchase range from 7% to 12% of the property value when including all taxes, fees, and commissions.
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Do I need a local tax advisor for property taxes in Montenegro?
Hiring a local tax advisor is strongly recommended for foreign property investors in Montenegro, especially if you plan to rent out your property or sell it in the future.
Montenegro's tax laws underwent notable changes in 2025, and local tax advisors stay current with evolving regulations, municipal variations, and optimal deduction strategies. They can help you navigate double taxation treaty benefits if your home country has such agreements with Montenegro, potentially reducing your overall tax burden.
Local advisors are particularly valuable for rental property owners who need to maximize allowable deductions, register for VAT when required, and ensure proper tourist tax collection and remittance. They also help maintain the detailed expense documentation required for tax compliance and audit protection.
Tax advisory fees in Montenegro typically range from €300 to €800 annually for basic property tax management, with additional charges for complex transactions or multiple properties. This investment usually pays for itself through proper deduction optimization and compliance assurance.
How easy is it for foreigners to own property in Montenegro?
Foreign property ownership in Montenegro is remarkably straightforward with virtually no restrictions for most property types, making it one of Europe's most accessible real estate markets for international investors.
Non-EU citizens can freely purchase apartments, houses, commercial properties, and developed land throughout Montenegro. The only significant restriction applies to agricultural and forestry land, which requires special permits and is generally limited to Montenegro citizens and residents.
The ownership process requires obtaining a Montenegrin tax identification number (TIN) and completing standard due diligence procedures. Foreign buyers have the same property rights as domestic owners, including the right to sell, rent, inherit, and mortgage their properties without additional restrictions.
Property purchases can qualify foreign investors for Montenegro's residency and citizenship programs, though requirements have evolved. As of September 2025, property investments of €250,000 in northern/central regions or €450,000 in coastal areas and Podgorica may support residency applications, though program terms can change.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Montenegro versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What are the residency requirements for property owners in Montenegro?
Property ownership in Montenegro does not automatically grant residency rights, but significant property investments can support residency applications through specific government programs.
As of September 2025, foreign property owners can apply for temporary residence permits through the investment residency program if their property purchase meets minimum thresholds: €250,000 for properties in northern and central Montenegro regions, or €450,000 for properties in coastal areas and Podgorica.
Temporary residence permits are typically granted for one year initially and can be renewed annually as long as the property investment is maintained. After five years of continuous temporary residence, property owners may apply for permanent residence status.
Property owners without formal residency can still freely use their properties for personal purposes, rent them out, and maintain ownership indefinitely. However, tax residency status affects income tax obligations - spending more than 183 days per year in Montenegro or having your primary economic interests there may trigger Montenegro tax residency with broader tax obligations.
Are there annual reporting requirements for foreign property owners?
Foreign property owners in Montenegro face straightforward annual reporting requirements that align with the country's tax calendar and are similar to domestic owner obligations.
All property owners receive annual property tax assessments before April 30th and must pay the assessed tax in two installments by June 30th and October 31st. No additional reporting is required for property ownership alone beyond responding to these municipal assessments.
Property owners with rental income must file annual tax returns reporting their rental revenue and expenses, with tax payments due according to Montenegro's standard filing deadlines. If you operate short-term rentals with revenue exceeding €30,000 annually, you must also register for VAT and file quarterly VAT returns.
It's something we develop in our Montenegro property pack.
Capital gains tax reporting is required only in years when you sell property, with returns and payments due by the annual tax filing deadline. Maintaining detailed records of all property-related expenses, improvements, and transactions throughout the year simplifies annual reporting and ensures compliance.
Can I claim deductions on property management and maintenance expenses in Montenegro?
Montenegro allows comprehensive deductions for legitimate property management and maintenance expenses, significantly reducing taxable rental income and capital gains.
- Rental income deductions: Property management fees, regular maintenance, repairs, insurance premiums, advertising costs, and utility expenses directly related to rental operations
- Standard deduction rates: Long-term rental properties typically qualify for 30% standard expense deductions, while registered short-term rentals may claim 50% to 70% deductions
- Capital gains deductions: Major renovations, structural improvements, system upgrades, and significant repairs that add property value can be deducted from capital gains calculations
- Professional service deductions: Legal fees, tax advisory costs, property management company fees, and real estate agent commissions for rental management
- Documentation requirements: All deductions require proper invoices, receipts, and contracts to support claims during tax filings or potential audits
The key to maximizing deductions is maintaining detailed expense records throughout the ownership period. Expenses must be directly related to income production (for rental deductions) or property value enhancement (for capital gains deductions) to qualify for tax benefits.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Montenegro's tax system positions the country as a competitive destination for property investment within Europe, offering moderate tax rates and straightforward compliance requirements.
The combination of flat 15% rates for rental income and capital gains, reasonable annual property taxes, and generous exemptions creates an attractive environment for both individual investors and those seeking residency through property investment.
Sources
- Montenegro Global - New Taxes in Montenegro in 2025
- Immigrant Invest - Taxes in Montenegro
- Violet Investment - Real Estate Tax in Montenegro 2025
- Omnia Capital Group - Complete Cost of Buying Property in Montenegro 2025
- CMM Montenegro - Property Taxes in Montenegro
- Global Property Guide - Montenegro