Montenegro’s accumulated tax debt has reached approximately €750 million, reflecting a widening gap between improved current tax collection and the state’s limited ability to recover long-standing liabilities owed by companies, municipalities, public institutions and insolvent taxpayers.
The latest figure is higher than the €655 million reported at the beginning of 2025 and the €633.1 million recorded in mid-2024. The increase does not represent an equivalent loss of newly generated tax revenue. Part of the growth is linked to additional interest charges, completed inspections and the formal recognition of previously undeclared or incorrectly calculated obligations. The overall trend shows that the accumulated tax-debt portfolio continues to expand despite repeated debt rescheduling programmes, interest-relief measures and stronger enforcement activities.
Interest accounts for around 40% of total tax debt
According to Sava Laketić, director of Montenegro’s Tax Administration, approximately €300 million of the total tax debt consists of accumulated interest. This means the estimated principal amount stands at around €450 million, while interest represents about 40% of the total outstanding balance.
The distinction is important for assessing fiscal exposure. Principal tax debt represents unpaid obligations that were expected to enter the state budget, while accumulated interest increases the nominal value of claims. For companies unable to repay the principal, additional interest accumulated over extended periods can make settlement more difficult.
Montenegro applies interest of 0.03% per day on overdue tax liabilities, equivalent to approximately 10.95% annually on a simple annualised basis. An unpaid obligation of €1 million can therefore generate nearly €110,000 in additional interest over one year, before accounting for payments, enforcement measures or changes in the outstanding balance.
Largest debtors account for part of outstanding liabilities
Official debtor data show that Montenegro’s 200 largest active tax debtors owe more than €95 million, while approximately 100 taxpayers in bankruptcy account for around €130 million. Together, these two groups represent approximately €225 million, or about 30% of the total tax-debt portfolio. Most of the liabilities are connected to legal entities rather than individuals.
The remaining approximately €525 million is distributed across a wider group of taxpayers, including businesses, municipalities, public institutions and other entities. Recovering this portion requires classification of debtors, updated property information, automated monitoring and differentiation between companies facing temporary liquidity problems and entities without realistic repayment capacity.
Tax debt exceeds planned budget deficit
Based on nominal economic assumptions used for the 2026 budget, accumulated tax arrears are equivalent to approximately 8.5–9% of GDP. The total amount is also almost 2.7 times larger than Montenegro’s planned €278 million budget deficit for 2026.
The €300 million interest component alone exceeds the government’s projected annual deficit. Tax arrears cannot be directly treated as available budget financing because a significant share may not be immediately recoverable or may never be collected.
Rescheduling programmes show mixed results
The Tax Administration is monitoring four tax-debt rescheduling programmes established under arrangements adopted in 2015, 2018, 2022 and 2025. The programme introduced under the 2018 Regulation on Deferred Payment of Tax Liabilities achieved a reported collection rate of 96%.
The 2022 tax-debt rescheduling programme recorded weaker performance, with slightly more than 60% of agreed obligations realised. A total of 5,209 taxpayers entered the programme, while decisions were cancelled for 780 taxpayers that failed to meet repayment conditions. The terminated arrangements covered claims worth approximately €64.5 million.
Municipal and public-sector liabilities included in new arrangements
Municipalities, local public institutions and municipally owned companies have also contributed to the accumulated liabilities. Under the latest rescheduling arrangement for municipalities, funds, public institutions and companies established by local governments, the Tax Administration issued 55 rescheduling decisions.
The agreements cover €54.5 million in principal debt and €21.5 million in accumulated interest. At the time of the latest assessment, two instalments had been paid under the new repayment schedules. The effectiveness of the programme depends on whether public-sector entities continue paying current taxes and social contributions while servicing previous obligations.
Uncollectible claims remain difficult to quantify
The Tax Administration is still working to determine how much of the €750 million portfolio is realistically recoverable. Some claims may become impossible to collect because of expired limitation periods, company liquidation, bankruptcy proceedings without distributable assets or property already pledged to secured creditors.
Regional Tax Administration units issue decisions terminating obligations where the absolute statute of limitations has expired, although the pace of this process has been described as unsatisfactory. Until these cases are resolved, government receivables include amounts with potentially limited economic value. A more detailed classification of the portfolio would separate recoverable claims, performing repayment agreements, secured claims, disputed assessments, bankruptcy claims and liabilities considered uncollectible.
Digitalisation aims to improve enforcement
Montenegro is using digitalisation and risk analysis to strengthen tax administration. The Integrated Revenue Management System (IRMS) is designed to connect taxpayer records, filings, payments and information from other public institutions.
The introduction of the system generated complaints from companies, accountants and citizens related to tax returns, company registration, certificates and access to electronic services. IRMS was introduced through multiple modules after delays linked partly to EU accession-related tax administration reforms. Some early difficulties were associated with differences between new digital procedures and existing legislation. Regulatory adjustments were further harmonised at the end of March 2026. The system has processed approximately 180,000 cases, including more than 50,000 cases in June alone.
Inspections identify tax-related violations
The Tax Administration has expanded enforcement activities through account blocking, property execution procedures, automatic institutional data exchange and earlier identification of debtors. During the first part of 2026, the authority submitted 64 cases to the Police Directorate for assessment of possible criminal liability.
Police subsequently filed 13 criminal complaints against legal entities and executive directors involving suspected tax and contribution evasion valued at approximately €1.7 million. The highest number of reported irregularities was identified in construction, followed by trade and hospitality.
Fiscalisation expands to professional services
The legal sector has also become part of expanded fiscalisation efforts. A total of 579 taxpayers from the legal profession had registered in the electronic fiscalisation system, with participation increasing during 2026.
Non-compliance may result in fines ranging from €2,000 to €12,000.
Tax arrears remain an institutional and fiscal issue
Montenegro is entering a period marked by infrastructure investment, social spending obligations, public-debt refinancing requirements and preparations for EU membership. The 2026 budget deficit target is 3.2% of GDP, increasing the importance of predictable revenue collection and expenditure control.
Tax debt does not represent sovereign debt, but the size of the outstanding portfolio affects assessments of institutional capacity, enforcement consistency and the reliability of state receivables.
For commercial banks, unpaid tax liabilities can also indicate financial pressure among companies that continue servicing bank obligations while accumulating unpaid public charges. The Tax Administration’s focus is therefore on determining the recoverable value of the portfolio, enforcing viable claims and removing expired or uncollectible balances through transparent procedures. Interest write-offs remain linked to repayment of principal obligations and compliance with current tax liabilities.
