The purchase went fine. That's usually how these start.
A US buyer closes on an apartment on the coast, everyone shakes hands, the keys change owner, and about four months later a question arrives by email — usually forwarded from an accountant back home, usually some version of "my CPA is asking me something about a treaty and a form, do you know anything about this?"
I've had that email enough times that I want to write the answer down once. Not because the Montenegrin side is complicated. It usually isn't. It's the seam between the two countries that nobody in the transaction was being paid to look at.
I should say plainly what I am and am not doing here. I'm not a US tax adviser and this is not US tax advice — your CPA or enrolled agent owns that side, and they should. What I can map is the Montenegrin leg, and the place where the two legs touch, which is exactly the part that tends to reach your accountant too late to do anything about it.
The assumption that costs the most
Almost every American buyer I've spoken to assumes there's a tax treaty. It's a reasonable assumption. Montenegro has a wide treaty network — Germany, the UK, Italy, Russia, Turkey, the UAE and roughly forty more.
The United States isn't one of them.
Two independent checks, both done on 19 August 2026:
- The IRS's own list of tax treaties (Table 3, List of Tax Treaties, marked "Updated through September 26, 2025") has no entry for Montenegro. It has no entry for Serbia, Bosnia and Herzegovina, or a former Yugoslavia either. Slovenia appears, because Slovenia negotiated its own.
- Montenegro's published treaty table doesn't list the United States either.
There's a second-order trap worth knowing about, because it's the kind of thing that shows up in a slide deck and sounds authoritative. Montenegro, on independence in June 2006, declared that it would continue to honour treaties concluded by the former Yugoslavia. That's genuinely true for a number of treaties — HMRC's own manual records that "in respect of Montenegro the 1982 Double Taxation Convention between the United Kingdom and Yugoslavia is regarded as having remained in force" (HMRC Double Taxation Relief manual, DT13380).
But Montenegro applies inherited treaties unilaterally. Whether the other country agrees is the other country's decision. So "Montenegro recognises the old Yugoslav treaties" is not the same sentence as "there is a treaty between you and Montenegro," and for the United States the second sentence isn't true.
What that means in practice: you don't get treaty relief, treaty tie-breaker rules, or a reduced treaty withholding rate. What you do get is the ordinary unilateral foreign tax credit mechanism in US law, which exists with or without a treaty. That's a real relief mechanism and for most buyers it does most of the work. It just isn't automatic, it's claimed on a form, and it has its own limits — which is your CPA's territory, not mine.
What Montenegro will actually tax
Short version, and only the parts a foreign owner meets.
On the way in. Buying on the secondary market triggers real estate transfer tax. Since 1 January 2024 this is no longer the flat 3% you'll still find repeated on a lot of websites — it's progressive:
| Consideration | Transfer tax |
|---|---|
| up to €150,000 | 3% |
| €150,000.01 – €500,000 | €4,500 + 5% on the excess over €150,000 |
| above €500,000 | €22,000 + 6% on the excess over €500,000 |
The return is due within 15 days of the obligation arising, and the tax base is the market value as assessed by the tax authority — not automatically the number written in your contract. That last point catches people who negotiated a good price and assumed the tax would follow it.
Buying a newly built unit directly from the developer is a different route: that transaction carries 21% VAT inside the price instead of transfer tax. It's one reason a new-build and a resale at the same headline number are not the same deal.
(I've cited the transfer tax brackets and the effective date because they're consistent across Montenegrin sources and the tax authority's own practice. I have not been able to pin the article number and gazette citation for the progressive amendment from a primary text, so treat the brackets as accurate and the citation as still owed — I'd rather say that than invent a reference.)
While you hold it. Rental income earned by an individual falls into Montenegro's "other income" category, taxed at a proportional 15%, plus a municipal surtax on the tax due — 13% in most municipalities, 15% in Podgorica and Cetinje. A non-resident is taxed in Montenegro only on Montenegrin-source income, which for you means the rent, not your income at home.
That Montenegrin tax is the tax you'll be looking to credit against your US liability. Which is why the receipts matter more than people expect.
What the United States wants to see
Here's the distinction that resolves most of the confusion in that forwarded email: reporting and taxing are two different obligations. Several of these forms don't cost you a cent. They just have to exist.
| What you own | Montenegro side | US reporting side |
|---|---|---|
| Apartment held in your own name | transfer tax on purchase; 15% + surtax on rent | not reportable on Form 8938 — foreign real estate held directly isn't a specified foreign financial asset |
| A Montenegrin bank account opened for the purchase | ordinary account | FBAR (FinCEN Form 114) once all foreign accounts together exceed $10,000 at any point in the year |
| The same apartment held through a company | company law and accounting obligations | the interest in the entity is reportable on Form 8938, valued by reference to what it holds |
| Rent received | taxed at source in Montenegro | reported on your US return; Montenegrin tax paid is the input for the foreign tax credit |
Three things worth pulling out of that table.
The FBAR threshold is $10,000 in aggregate, at any moment in the year — not on 31 December, and not per account. If you moved the purchase money through a Montenegrin account, you almost certainly crossed it, even if the account was empty before and after. It's filed with FinCEN, not with your tax return; the deadline is 15 April, with an automatic extension to 15 October that you don't have to ask for.
Form 8938 has thresholds that change depending on where you live. They're higher if you're abroad, which surprises people who assume moving increases their filing burden:
| Filing status | Living in the US | Living abroad |
|---|---|---|
| Unmarried | over $50,000 at year end, or over $75,000 at any time | over $200,000 at year end, or over $300,000 at any time |
| Married filing jointly | over $100,000 at year end, or over $150,000 at any time | over $400,000 at year end, or over $600,000 at any time |
And the third one is the one that actually changes decisions. Holding the property directly keeps it out of Form 8938. Putting it into a company puts your interest in that company squarely into Form 8938. I'm not telling you which is better — that depends on things I can't see from here, and there are good Montenegrin reasons to use a company. I'm telling you that the choice has a consequence on the other side of the Atlantic, and it is far cheaper to make that choice once, in advance, than to unwind it.
One more practical note: a Montenegrin bank will ask you whether you're a US person, and the answer goes somewhere. The US and Montenegro signed an intergovernmental agreement on FATCA in 2017. I've seen the reporting model described inconsistently in secondary write-ups and I couldn't open the official text to settle it, so I'll leave the mechanism unstated. The part that matters to you doesn't depend on the mechanism: assume your account is visible, and file accordingly.
Why nobody mentioned this before you signed
I want to be careful here, because this is a point about structure and not about anyone's character.
In a typical Montenegrin purchase, the people around the transaction — the agent who introduced the property, and often the person who prepares the paperwork — are paid on completion, and frequently by the seller's side. That's a normal, legal, disclosed arrangement. But it defines what the job is: getting to signature. Nobody in that chain is paid to ask which US forms your ownership structure will generate, or whether the entity you were advised to set up will complicate a credit claim you'll make in fifteen months.
There's a related rule in Montenegrin professional law that surprises foreign buyers. Under the Montenegrin advocacy code of ethics — the new one, adopted by the Bar Assembly on 14 March 2026 and published in Službeni list CG 056/26 on 24 April 2026 — a lawyer drafting an instrument for a bilateral transaction is treated as acting for both parties. So "the seller's lawyer will draw up the contract, don't worry" does not mean someone in the room is exclusively yours. It means nobody is.
That's not an argument that anyone behaved badly. It's an argument for knowing who is answering to whom before you rely on an answer.
The arithmetic I'd actually run
Take the transfer tax alone. On a €400,000 resale it's €4,500 plus 5% of €250,000 — €17,000, due within 15 days, calculated on a value the tax authority assesses rather than the one you negotiated. Get the structure or the valuation wrong and that's not a number you argue about casually; it's a number you pay and then try to recover through a separate procedure, which is slower and less certain than paying it correctly the first time.
And if you're tempted by the thought that you can always litigate your way out of a bad document later: under Montenegro's advocates' tariff, the legal costs a court awards are set by the tariff and are not tied to what you actually paid your lawyer. Winning is not the same as being made whole.
Set the cost of having the contract and the ownership structure read before signature against that €17,000 line — one line, of several, in one transaction. It's a rounding error. I'm not going to quote you a number here, and I'd be a little suspicious of any lawyer who quotes one before seeing the file, but you can already see which side of the comparison it falls on.
What I'd send me, if I were you
If you're at the stage where a reservation form or a draft contract exists, that's the moment the review is worth most — before signature, while terms are still terms and not obligations. Send the draft contract, the cadastre extract for the unit, and one sentence about how you intend to hold it (own name, or company) and where you're tax resident. That's enough to see the Montenegrin exposure and to flag what your US adviser needs to know early rather than in April.
RoNa Legal advises foreign clients on Montenegrin law; representation before Montenegrin authorities and courts is conducted together with advocates entered in the register of the Bar Association of Montenegro. We don't take commission from sellers, agents or developers on property transactions — our fee is for the review, which is the only way the review can tell you not to buy something. You can see the areas we work in on our services page, read our note on engaging a lawyer in Montenegro, or get in touch through contact. If the building you're looking at is newer than its paperwork, start with what "not yet legalised" costs a buyer.
