Montenegro is set to enhance its regulatory framework concerning the burgeoning online accommodation sector by introducing a new VAT law. This legislation mandates that digital rental platforms disclose transaction data related to short-term accommodation bookings, marking a significant step in the country’s efforts to formalize oversight of its expanding tourism economy.
The draft legislation, currently undergoing public consultation, aims to address the challenges posed by the rapid growth of online tourism and private accommodation, which have surged alongside Montenegro’s tourism boom. By requiring both domestic and foreign platforms to maintain transaction records and report relevant data to government authorities, the initiative seeks to bolster tax compliance and reduce informal economic activities.
This move aligns with a wider trend across Europe, where governments are increasingly scrutinizing short-term rental platforms amid concerns over tax collection and the informal economy. For Montenegro, where tourism is a vital economic sector contributing significantly to GDP, employment, and foreign currency inflows, these changes are particularly critical.
Over the last decade, online booking platforms have transformed Montenegro’s accommodation landscape, with private rentals increasingly competing with traditional hotels. This shift is especially pronounced along the Adriatic coast, where real estate investments driven by tourism have surged. However, this rapid expansion has also led to regulatory gaps that complicate monitoring occupancy rates and ensuring compliance with tax regulations.
Authorities have struggled to track short-term rental activities effectively, as many operate outside formal reporting systems. This lack of visibility has created an uneven playing field between registered hotels and informal rental providers. The proposed VAT law aims to close these gaps by enhancing fiscal oversight and aligning Montenegro’s regulations with European standards.
Access to transaction data from these platforms is expected to improve tax administration efficiency, particularly during peak tourism seasons in coastal municipalities like Budva, Kotor, Tivat, Herceg Novi, and Bar. Additionally, this measure may impact Montenegro’s real estate market, where short-term rentals are integral to property investment strategies in premium tourist areas.
As reporting transparency increases and tax compliance tightens, yield calculations for certain investor segments—especially smaller operators reliant on informal rentals—could shift. However, institutionalizing the sector may ultimately enhance the credibility of Montenegro’s tourism and real estate markets.
International investors and hospitality operators are increasingly seeking transparent regulatory environments and reliable tourism statistics when evaluating hospitality-related assets. Enhanced accommodation reporting could improve Montenegro’s attractiveness as an investment destination over time.
This proposed legislation also signifies a new phase for Montenegro’s digital economy as it adapts its tax systems to accommodate platform-based business models that often transcend traditional regulatory frameworks. Digital accommodation platforms are particularly significant due to their direct impact on local taxation and housing market dynamics.
As Montenegro navigates this balance between stricter oversight and maintaining its competitive edge in tourism, policymakers face the challenge of ensuring transparency and fiscal compliance without stifling the flexibility that has fueled the sector’s growth over the past decade.
The public consultation on the VAT law amendments will continue in the coming weeks as authorities seek input from tourism operators and business associations before proceeding with formal adoption of the legislation.
