The proposed fiscal strategy outlines a significant change: the removal of the current VAT exemption for international shipments valued up to 75 euros. Under the new plan, all foreign shipments will be subject to full value-added tax (VAT).
Currently, Montenegrin residents enjoy VAT exemption on packages valued below 75 euros and do not pay customs duties if the shipment is under 150 euros. According to the Postal Services Development Strategy, there were 800,000 such shipments last year, utilized by 270,000 individuals.
For example, VAT on a 75-euro shipment would amount to 15.75 euros, making the total cost 90.75 euros. For a shipment valued at 10 euros, VAT would be 2.10 euros.
The proposed legal change aligns with EU Directive 2009/132, which mandates the elimination of VAT exemptions for low-value imports. This exemption was abolished in the EU on July 1, 2021, meaning all commercial shipments imported into the EU now incur VAT, regardless of value. The aim is to create a fairer and more transparent taxation system and reduce tax evasion. The new rule is expected to come into effect on January 1, 2025.
Previously, Montenegro exempted internet purchases up to 150 euros from VAT. In 2017, the government proposed aligning with EU standards by reducing this threshold to 22 euros. This led to a petition from citizens, arguing that such a change would negatively impact their standard of living and purchasing power.
Online shopping provided Montenegrins access to a variety of goods at lower prices compared to local stores. In a time of financial strain and low living standards, this shopping method allowed citizens to purchase desired products affordably. With the recent increase in VAT to 21%, and higher excise duties on tobacco, alcohol, and fuel, reducing the VAT-free threshold further is seen as an additional burden. The petition called for the withdrawal of this proposed change.
In response, the government adjusted the threshold to 75 euros, reducing it from the initially proposed 150 euros. Novo Radović, General Director of the Directorate for Tax and Customs System, justified this change by noting that the Post Office handled 319,000 internet purchases in 2016, which warranted taxation.
In neighboring Bosnia and Herzegovina, a similar law was adjusted in the opposite direction in the same year. The VAT and customs duty exemption threshold was increased from 50 to 300 convertible marks (25 to 150 euros) to bolster online trade. This provision remains in effect, allowing Bosnian citizens to purchase products online from abroad up to 150 euros without paying taxes.
The Postal Services Development Strategy up to 2028 indicates that Montenegrin citizens spent an average of 443 euros annually on online shopping in 2022, compared to the EU average of 1,018 euros. The strategy forecasts an increase in annual online shopping expenditure to 675.5 euros by 2027, with the number of users rising to 316,000.
The rise in e-commerce is expected to drive demand for package delivery services, presenting an opportunity for postal operators to boost revenue and support economic growth. The impact of imposing VAT on all shipments on online shopping volumes and delivery company revenues remains to be seen.
