Montenegro’s Parliament has adopted a new Value Added Tax (VAT) Law that will replace the country’s existing VAT framework once Montenegro becomes a member of the European Union.
The legislation was approved on July 9, 2026, with unanimous support from 48 deputies. The new framework does not introduce immediate VAT changes, as Article 215 specifies that its application will begin on the date of EU accession. Until that point, Montenegro will continue applying the existing VAT legislation, including amendments introduced in February 2026.
New VAT System Preserves Current Rates Before EU Entry
The adopted law maintains the existing VAT structure, including the:
- 21% standard VAT rate;
- 15% and 7% reduced rates;
- €30,000 VAT registration threshold.
The legislation replaces a VAT framework that has been amended repeatedly since 2002. Its purpose is to align Montenegro’s tax system with the EU’s common VAT framework established under Council Directive 2006/112, including later amendments related to VAT digitalisation. The law also incorporates rules related to VAT refunds for taxable persons established outside Montenegro.
EU Accession Will Change Cross-Border VAT Treatment
The new framework is designed around Montenegro’s future participation in the EU fiscal territory and access to European tax-information systems.
Several mechanisms introduced by EU VAT rules depend on membership, including:
- intra-Community acquisitions;
- intra-Community supplies;
- distance selling within the EU;
- VAT-number verification between member states;
- automated cooperation between tax administrations.
Until accession, trade with EU member states continues to be treated as import and export activity, requiring customs declarations and import VAT procedures. After accession, movement of goods between Montenegro and EU member states will generally become intra-EU transactions. Customs borders will no longer apply in the same way, but VAT controls will continue through invoices, VAT identification numbers, reporting obligations and electronic data exchange.
Businesses Will Need New Accounting and Reporting Systems
The transition could affect company liquidity because qualifying intra-EU acquisitions may no longer require businesses to finance import VAT at the border in the same manner.
Greater responsibility will shift to internal accounting and compliance systems.
Companies will need to manage:
- VAT number verification;
- place-of-supply assessments;
- digital reporting requirements;
- evidence supporting VAT exemptions and zero-rating.
Incorrect VAT data or incomplete reporting could create liabilities after goods and services have already moved across borders.
Tourism and Digital Services Face Specific VAT Adjustments
Sectors with significant transactions involving non-residents, including tourism, digital services and property-related activities, will face additional compliance requirements.
EU VAT rules determine tax treatment based on factors including:
- customer status;
- place of supply;
- type of service;
- whether transactions involve electronically supplied services or immovable property.
The same customer relationship and payment structure may receive different VAT treatment depending on the characteristics of the service provided.
Law Expands Digital Tax Administration Requirements
The new legislation prepares the framework for:
- electronic invoicing;
- digital reporting;
- stronger cross-border information exchange.
These mechanisms are intended to strengthen the Tax Administration’s ability to identify VAT fraud risks, including carousel fraud, undeclared platform income and inconsistencies between suppliers and customers. The increased use of digital reporting will also reduce the possibility of informal corrections after reporting deadlines.
Tax Administration and Companies Face Implementation Work
The Tax Administration has stated that implementation will require adjustments to internal processes and information technology infrastructure. Finance Minister Novica Vuković told Parliament that the previous VAT framework was no longer sufficient for the digital economy and expanding cross-border trade. Businesses will also need to prepare their systems for the future regime.
Enterprise software will need to distinguish between domestic transactions and intra-EU supplies and acquisitions, verify VAT numbers beginning with the ME prefix, generate required reports and maintain documentation supporting VAT treatment. Retailers and online sellers will need to adapt to distance-selling rules, while accountants will need to reconcile invoices with information available to tax authorities in other EU countries.
February VAT Amendments Remain in Force
The immediate VAT changes currently applied in Montenegro originate from amendments adopted in February 2026. Those amendments introduced VAT treatment for qualifying construction land and revised rules related to VAT numbers and representation of non-residents. The newly adopted accession-focused VAT law does not replace those measures before EU membership. The Tax Administration has confirmed that the February amendments remain part of the current operative VAT system.
Preparation Required Before EU Accession
The new VAT framework provides Montenegro with a future EU-compatible tax structure, but businesses will need to prepare before the accession date. Accounting software updates, contractual tax provisions and employee training will need to be completed before the new rules become applicable. The legislation itself will remain inactive until EU membership, while implementation preparations will continue in advance.
