Montenegro is proposing changes to its tax legislation aimed at ensuring that additional tax arising under the 15% global minimum corporate tax is collected domestically when it applies to qualifying profits generated in the country. The proposed amendment submitted to parliament would clarify Montenegro’s domestic top-up tax within the OECD and EU Pillar Two framework.
The rules primarily cover multinational and large domestic groups with consolidated annual revenue of at least €750 million in at least two of the previous four fiscal years. Where the effective tax rate on qualifying operations in Montenegro is below 15%, the domestic top-up mechanism is intended to collect the difference in Montenegro.
Domestic collection under global minimum tax rules
Under the international minimum-tax framework, additional tax that is not collected in the jurisdiction where low-taxed profits arise can become payable in another jurisdiction within the corporate group structure. The proposed amendment is therefore intended to establish Montenegro as the jurisdiction collecting the additional amount when the Pillar Two rules require a top-up on qualifying profits generated locally.
Montenegro has historically used a competitive corporate tax system, including a progressive structure with rates below 15% for certain taxable profit bands. Pillar Two changes the treatment of those lower rates for qualifying large multinational groups. A company may continue to calculate its domestic corporate income tax under Montenegro’s ordinary rules, while the international framework can require its effective taxation to reach 15%. If Montenegro applies a qualified domestic minimum top-up tax, the additional revenue remains in the country. Without such a mechanism, the corresponding tax can instead be collected by the jurisdiction of the parent company or another group entity.
Limited direct impact on most companies
The proposed changes would not apply across the wider corporate sector.
Most Montenegrin companies have consolidated revenue well below the €750 million threshold and therefore fall outside the global minimum-tax regime. SMEs, local family businesses and most domestic taxpayers are not expected to be directly affected by the Pillar Two rules. The main exposure is among large multinational groups operating in areas including banking, telecommunications, energy, retail and tourism, as well as other capital-intensive industries.
For these groups, the applicable tax burden increasingly depends on the wider corporate structure and the allocation of profits and covered taxes across jurisdictions rather than Montenegro’s domestic rate alone.
Greater tax reporting requirements
Pillar Two calculations require substantially more information than conventional corporate income tax reporting. Affected groups must account for income, deferred tax, covered taxes, ownership structures and effective tax rates at jurisdiction level. Montenegrin subsidiaries of multinational groups may consequently need closer coordination with foreign headquarters and tax advisers. For some businesses, the compliance requirements could be more significant than the resulting additional cash tax.
Not every qualifying group would generate a top-up payment. Companies already subject to effective taxation of at least 15% would not incur an additional amount on that basis, while transitional provisions or other adjustments under the international framework may also apply. The proposed measure therefore does not establish an automatic 15% tax rate for every large company operating in Montenegro. The calculation is determined at group and jurisdiction level.
Implications for Montenegro’s investment model
The changes also affect the role of taxation in Montenegro’s approach to attracting foreign investment. Low corporate tax rates have been among the factors used to support the country’s investment competitiveness. Under Pillar Two, however, the benefit of taxation below the global minimum for the largest multinational groups is reduced because an additional amount can become payable in another jurisdiction.
Investment decisions for those companies therefore place greater importance on factors such as infrastructure, energy costs, workforce quality, market access and investment support compatible with EU state-aid rules. Montenegro’s tax system remains relevant for companies outside the Pillar Two threshold, while other tax characteristics and broader investment conditions can continue to influence larger groups. The international minimum-tax framework nevertheless limits the extent to which jurisdictions can compete for the largest corporate groups solely through low effective tax rates.
Potential effect on public revenue
For Montenegro’s public finances, applying the domestic top-up mechanism could retain tax revenue that might otherwise be collected abroad. The potential amount cannot be determined without company-level information because it depends on the number of qualifying groups operating in Montenegro and their respective effective tax positions. The immediate fiscal effect could therefore be modest, while the measure has broader implications for the allocation of taxing rights.
The proposed changes would bring Montenegro’s tax framework further into line with EU and OECD rules as the country advances towards accession while providing for domestic collection of the additional tax where the international minimum applies. The wider reform is shifting international tax competition away from headline corporate rates and towards factors including economic substance, infrastructure and the overall business environment. For Montenegro, the proposed amendment is intended to ensure that where the 15% minimum effective tax applies to qualifying profits generated in the country, the resulting top-up is collected by Montenegro rather than another jurisdiction.
