Object of VAT taxation
Object of VAT taxation is as follows:
- Supplies of products and provision of services effected for consideration by a taxpayer in furtherance of his activities;
- importation of goods into Montenegro.
Supply of goods
Supply of goods shall be the right to dispose of movable or immovable (tangible) things. The following shall also be considered a supply of goods:
- Supply of goods for consideration on the basis of a regulation (decision) made by a state body or a local government body;
- Sales of goods under contract on the basis of which commission is payable on the purchase or sale of goods;
- Sales of goods on the basis of contract of lease of goods a specified period of time, or the basis of sales contract on deferred payment which provides that (under normal circumstances and in the normal course of events)ownership shall be transferred no later than by the time of payment (disbursement) of the final installment;
- Supply of newly constructed facilities and transfer of material rights and shares in respect of immovable property which give the holder (owner) ownership rights or the right to possess the immovable property or part of the immovable property;
- Disposal of the business assets of the taxpayer by another person including liquidation and bankruptcy administrators and custodians;
- Supply (acquisition) of electric power, gas, and energy for heating, refrigeration or air conditioning;
- Use of goods of taxpayer for non-business purposes;
- Acquisition of ownership rights on goods by, or for the account of, the state or local community on the basis of law;
- Withdrawal of ownership right on goods [from any person) on the basis of law.
Supply of land (agricultural, building, developed and undeveloped), as well as the supply of used passenger cars, motorbikes and vessels, for which the taxpayer, during the supply, was not entitled to deduct the input VAT, shall not be considered as a supply of goods.
If the taxpayer takes goods which form part of the business assets and uses them for private purposes or for private purposes of his employees or disposes of the goods free of charged or for consideration that is lower than that which could be achieved on the market or uses the goods for a purpose unrelated to the furtherance of his activities shall be considered supply of goods for consideration.
The following shall be considered a supply of goods for consideration:
- Taking [using] of products which a taxpayer produces, builds, processes, acquires or imports within the furtherance of his activities for his own personal use if the value added tax on such products, provided they have been acquired from another taxpayer, cannot be fully deducted;
- the use of goods for which input VAT has been partly or wholly deducted by the taxpayer and for the purpose of performing VAT exempted activities;
- the retention of goods for which input VAT has been partly or wholly deducted after the cessation activities or the cessation of registration.
Import of goods shall mean any entry of goods into the customs territory of Montenegro.
Supply of services
Supply of services shall mean the performance, abandon ace or permission of each operation in the furtherance of business activities other than the supply of goods. The following shall also be considered a supply of services:
- the transfer, assignment or use of copyrights, patents, licenses, trademarks and other property rights (hereinafter property rights);
- supply of services on the basis of a regulation [decision] of a state body or local community body;
- use of services of a taxpayer for non-business purposes and toleration or omission of certain actions;
- exchange of services;
- the use of goods forming the part of business assets of a taxpayer for the provision of services for private purposes of the taxpayer, his employees, or other use of goods for purposes unrelated the furtherance of his activities;
- supply of services performed a taxpayer without consideration or for reduced consideration for private purposes or for the private purposes of his employees or purposes other than the furtherance of his activities.
In the supply of services, where a taxpayer acts in his own name and for the account of other person, it shall be considered that the taxpayer both receives and performs such services.
The VAT taxpayer shall be:
- Taxpayers who supply goods that is services on which VAT is accounted for and paid;
- Tax representatives appointed by the taxpayer who does not have a registered office, business unit, permanent that is regular residence in Montenegro (hereinafter: taxpayer not based in Montenegro) if the taxpayer performs the supply of goods or services in Montenegro. If the taxpayer not based in Montenegro does not appoint a tax representative, the recipient of the goods or services shall pay the VAT;
- Recipient of the services, except in the case when the recipient is a person who is not a VAT taxpayer, in which case the taxpayer is the provider of service;
- Any person who shows VAT in his invoice or other document, which serves as invoice;
- Person that imports goods that is recipient of goods in case of import.
Taxpayer shall be:
- any person who conducts any business activity independently, in any place, regardless of a purpose or result of that activity.
- a person who temporarily carries out the activity relating to the delivery of newly built construction facilities or parts of construction facilities.
- a person who imports goods for his own account or receives goods from abroad, as well as the person for whose account the goods are being imported.
Place of taxation
VAT shall be accounted for and paid at the place of supply of goods or services was performed or at the place where the supply is considered to be performed. The territory of Montenegro shall be considered the single place of the supply of goods and services.
Inception of obligation to account for VAT
VAT is accounted for at the moment of delivery of goods or the moment of providing the service. Goods shall be considered delivered and services performed when an invoice is issued.
The obligation to account for VAT for imports commences at the moment of inception of liability to pay the customs duties and other import fees.
The taxable amount for VAT shall be everything which constitutes the payment (consideration) which the taxpayer shall receive from the purchaser, customer or third party for performing supply of goods or services, including subsidies directly linked to the price of such supply, excluding the VAT, unless otherwise provided by this law. The taxable amount shall include:
- excise duty and other taxes, fees, import duties and charges, excluding VAT;
- the indirect costs, such as commissions, cost of packaging, transport, and insurance which the supplier charges to the purchaser or client of the services;
- amounts charged on the returnable packaging and the caution money charged.
VAT shall be accounted for and paid at the general rate of 21% on the supply of goods, services and import of goods, except for supply of goods, services and import of goods for which it has been prescribed that the VAT shall be paid at a reduced rate, as well as on supply of goods, services and import of goods that have been zero rated.
VAT shall be accounted for and paid at the reduced rate of 7% on the supply of goods, services and import of goods, as follows:
- Basic products for human nutrition (bread, flour, milk and dairy products, baby food, fat, cooking oil, meat and sugar);
- Medicines, including also medicines used for veterinary medicine;
- Orthotic and prosthetic tools, as well as medical devices which are surgically implanted in the body;
- Textbooks and teaching aids;
- Books, monographic and serial publications;
- Services of accommodation in hotels, motels, apartment hotels, tourist settlements, boarding houses, leisure, camps and villas;
- Potable water, except for bottled water;
- Daily and periodic press, except those of completely or mostly advertising content;
- Services of public transportation of passengers and their personal baggage;
- Services of public hygiene;
- Funeral services and goods related to those services;
- Copyrights and services in the area of education, literature and art;
- Copyrights in the area of science and art products, collections and antiques;
- Services charged in the form of tickets for cinema and theaters, concerts, museums, fairs, amusements parks, exhibitions, zoos and similar cultural and sports performances, except for those for which exemption from VAT payment is prescribed;
- Services regarding the use of sports facilities for non-profit purposes;
- Services provided in marinas;
- Computer equipment;
- Fodder, fertilizer, devices for plant protection, reproduction seeds, planting material and livestock.
VAT shall be paid at the rate of 0% on:
- goods that have been exported from Montenegro by the seller that is goods that have been exported on his behalf by another person;
- supply of services, including transport and other ancillary services, except services which are directly linked to export that is import of goods;
- goods exported from Montenegro by a purchaser that is another person on behalf of the purchaser, who has not established a business in Montenegro, except for goods intended to supply private watercrafts, aircrafts or any other means of transport for private use;
- services performed on goods imported in Montenegro and exported by a person who has provided the service or by a client if he has not established the headquarters, business unit, i.e. a permanent or usual residence in Montenegro;
- supply of services provided by representatives or other intermediaries in the name and for the account of another person, provided that those services are a part of services listed in this Article or services provided outside Montenegro. Exemption does not relate to travel agents that are providing services in the name and for account of travelers outside Montenegro;
- supply of fuel and other necessary goods used for supplying: vessels for open-sea sailing which transport passengers for consideration that is which are intended for performing commercial and industrial activities; sea rescue and assistance vessels; military vessels leaving Montenegro, which destinations are foreign piers, that is anchorages;
- goods and services that are used in international air and maritime traffic;
- goods and services intended for: the official purposes of diplomatic and consular representatives; the official purposes of international organizations, if this is envisaged by an international treaty; for personal needs of foreign staff of diplomatic and consular representatives including their family members; for personal needs of foreign staff of international organizations including members of their families, if provided by international treaties;
- medicines and medical devices, determined by the list of medicines, i.e. medical devices prescribed and issued at the expense of the Health Insurance Fund;
- goods and services used for exploration of petroleum drills on the open sea;
- deliveries of goods to the free zone, free and customs warehouses and deliveries of goods within a free zone, free and customs warehouses;
- delivery of goods or services when it is envisaged by international treaties or contract of donation that tax expenses shall not be paid from the received funds.
Goods shall be considered as exported when they are actually taken out of Montenegro or when they enter a customs-free zone or a customs warehouse if intended for export.
Obligation to issue invoice
Taxpayer shall be obligated to issue invoice or any document, which can be used as and invoice for each separate supply of goods that is services. Invoice shall be issued in two copies, where buyer keeps original of invoice, and seller keeps copy of invoice.
Taxpayer shall be obligated to issue invoice for any payment received prior to supply of goods or services (subscription, advance payment), as well as for any subsequent change of tax base.
An invoice shall be any document issued by a taxpayer or by other person on taxpayer's request regardless of the form and title, which contains a calculated supply of goods that is services.
In the case of exchange of goods or services, every participant in exchange shall be obligated to issue invoice.
Tax period is the time period in which taxpayer shall be obliged to account and pay VAT.
The tax period shall be a period starting as of the first until the last day in a month (calendar month).
Accounting for VAT
Taxpayer shall account for VAT according to the amounts charged on taxable supplies indicated on the issued invoices for supplied goods that is for services rendered in the tax period.
The amounts charged on taxable supplies as referred to in the paragraph 1 of this article shall be considered to include:
- the amounts on issued invoices;
- the amounts of advance payments that have been made;
- the value of the supply of goods or services;
- the amounts on invoices issued by the taxpayer that has a registered office abroad.
Submission of VAT return
The taxpayer shall indicate his tax liability in the monthly tax return for assessment of VAT.
The taxpayer shall submit the tax return to the responsible tax authority no later than the 15th day of the following month after the elapse of the tax period.
Payment of the tax liability
Tax liability for the taxation period becomes payable on the 15th day of the current month after the elapse of the taxation period.
Refund of input VAT
If the amount of the tax liability (output tax) in a tax period is lower than the amount of the input VAT which the taxpayer may deduct in the same period, the difference in VAT shall be accepted as a tax credit for the following tax period that is it shall be refunded upon the request within 60 days after the VAT return had been submitted for calculation.
A taxpayer, who mainly exports goods and taxpayer who in more than three successive VAT assessments states the surplus of input VAT, is returned the difference in VAT within 30 days after the VAT return was submitted for calculation.
Storage of documentation
Taxpayers shall be obliged to store all received and issued documents, in particular, received and issued invoices, documents on amendments to invoices, export and import documents, financial documents, documents on the basis of which they have exercised VAT exemptions, VAT settlements and all other accounting documents in any way concerning the supply of goods and services that is the import of goods which are important for charging, levying and paying VAT for a period of at least five years after the end of the year to which these documents refer.