An EU parent company being briefed on Montenegro is frequently told that the country has already transposed the European withholding exemptions — that dividends from a Montenegrin subsidiary, and interest and royalties paid to an associated EU company, are free of withholding tax. The statute does contain those exemptions, in full detail, with thresholds, holding periods, certificate procedures and anti-abuse rules.
None of it applies. A separate article of the same Act suspends the entire chapter until the day Montenegro joins the European Union, and that day has not come. A group that plans its financing or its dividend policy around the exemption is planning around a provision that will not be there when the payment is made.
Article numbers below are from the consolidated Zakon o porezu na dobit pravnih lica, chain "Službeni list RCG" 065/01 through "Službeni list CG" 088/24 of 13.09.2024 and 104/26 of 17.07.2026, read on 5 September 2026. General information about Montenegrin law, not advice on a particular group.
What the chapter actually grants
Chapter VIIa is headed "Taxation of payments of interest, royalties, dividends and profit shares between associated companies in European Union Member States". It is a domestic transposition of the two European directives that remove withholding inside a group, and it is written out properly rather than gestured at.
Article 29d(1) provides that interest and royalty payments made by a Montenegrin company, or by a Montenegrin permanent establishment of a company from another EU Member State, are not subject to withholding tax, where they are made to associated companies entitled to the interest or royalty in another EU Member State, or to a permanent establishment — situated in another Member State — of a company seated in Montenegro.
Article 29d(3) defines the association, and it is a 25% test held for time:
- the payer holds a direct minimum interest of 25% of the recipient's capital; or
- the recipient holds a direct minimum interest of 25% of the payer's capital; or
- a third company holds a direct minimum interest of 25% of both payer and recipient, both being companies of EU Member States,
in each case for a period of at least 24 months.
Article 29d(4) adds a three-part test that each of payer and recipient must satisfy: it must be organised in a legal form set out on a list the Ministry publishes on its website; it must be resident in an EU Member State; and it must be subject to a corporate profit tax that is itself on a list the Ministry publishes on its website. Article 29d(5) removes taxpayer status from a company that is exempt from corporate tax — so an entity chosen for its own exemption fails the test rather than benefiting twice.
Article 29d(6) requires the EU recipient to receive the payment for its own account and in its own name, and not as an intermediary — expressly not as an agent, proxy or authorised signatory. Article 29d(7) defines the permanent establishment as a fixed place of business in one Member State through which a company of another Member State carries on business wholly or partly.
Article 29e governs permanent establishments on both sides: a PE is the payer where the payment is a deductible expense for it in its Member State (29e(1)); it is the recipient where the underlying claim or right is connected to that PE and the income is subject to corporate tax there (29e(2)); and where a PE is treated as payer or recipient, no other part of the same company is (29e(3)). Article 29e(4) excludes payments to a PE, and payments made by a PE located in a non-EU state through which an EU company carries on business.
Dividends, on a different threshold
The dividend rules sit in Article 29h, and the numbers are not the same as the interest and royalty numbers — a distinction that is easy to lose when the chapter is summarised as "the EU exemptions".
Article 29h(1) exempts from withholding the payment of dividends and profit shares by a Montenegrin subsidiary to a parent company in another EU Member State.
Article 29h(2) defines the parent as a company holding at least 10% of the ownership interest in the capital of the distributing subsidiary, continuously for at least 24 months. The holding threshold is therefore 10% for dividends against 25% for interest and royalties; the 24-month period is common to both.
Article 29h(4) runs the exemption in the other direction: where a parent company in Montenegro, or its Montenegrin permanent establishment, receives distributed profit from a subsidiary in an EU Member State, it excludes that income from the tax base — but only if the distribution is not deductible as an expense for the subsidiary. That condition is the hybrid guard: an amount deducted at the paying end cannot also be exempt at the receiving end.
Article 29h(5) applies the same three-part entity test as Article 29d(4), and Article 29h(6) the same exclusion for a company exempt from corporate tax.
The certificate, and who pays if it is missing
The exemption is not self-executing on either limb, and both limbs put the risk on the Montenegrin side.
Article 29f(1) makes the interest and royalty exemption conditional on the recipient delivering to the payer a certificate of the competent tax authority of the recipient's state, proving that the Article 29d and 29e conditions are met.
Article 29f(2) states the consequence in one sentence: if the recipient does not prove those conditions at the moment of payment, the payer must pay the withholding tax. Not later, and not by the recipient.
For dividends, Article 29h(3) requires the distributing subsidiary to deliver to the competent tax authority, at the moment of payment, the certificate by which the parent proves the conditions in Article 29h(2) and (5).
Article 29f(3) completes the symmetry in the other direction: where an EU payer pays a recipient in Montenegro, the Montenegrin tax authority issues that recipient the certificate proving the same conditions, with the form left to the Ministry by Article 29f(4).
What the chapter refuses to cover
Article 29g(1) removes five categories of payment from the interest and royalty exemption entirely:
| Excluded payment | Article 29g(1) |
|---|---|
| Payments having the character of a profit distribution or a return of capital | point 1 |
| Interest on loans carrying a right to participate in the debtor's profit | point 2 |
| Interest on loans giving the lender a right to exchange the interest entitlement for a profit participation | point 3 |
| Payments under a loan agreement containing no provision for repayment of principal | point 4 |
| Payments under a loan agreement where principal falls due more than 50 years after the loan was issued | point 5 |
Article 29g(2) caps the exemption at arm's length: where the interest or royalty exceeds what would have been agreed in the absence of the relationship, the exemption applies only to the amount that would have been agreed. Article 29g(3) withdraws it altogether where the payments are established to have been made for the purpose of tax evasion or tax avoidance, and Article 29h(7) does the same for dividends.
Article 29i closes the chapter with an interpretive rule worth noting: the provisions of the chapter and the provisions of double taxation treaties are applied in the way that secures the more favourable tax treatment for the taxpayer.
Article 45a, which switches all of it off
Everything above is law. None of it operates.
Article 45a provides that the provisions of Chapters VIa, VIIa and Xa, and Articles 38m and 40a, shall apply from the day of Montenegro's accession to the European Union.
| Deferred by Article 45a | What it contains |
|---|---|
| Chapter VIa | tax treatment of mergers, divisions, partial divisions and transfers |
| Chapter VIIa | the interest-royalty and parent-subsidiary withholding exemptions above |
| Chapter Xa | the anti-profit-shifting rules |
| Articles 38m, 40a | advance pricing agreement; general anti-abuse rule |
The deferral is not a drafting oversight and it is not new. The same technique carries the anti-avoidance side of the Act, and Montenegro published the implementing rulebooks for those rules carrying the identical clause — we set that out in the anti-profit-shifting rulebooks and the accession date.
What is less often noticed is that the deferral is symmetrical. The chapter that would relieve an EU group of withholding is suspended on exactly the same terms as the chapter that would burden it with controlled foreign company and interest limitation rules. Commentary tends to report the second and forget the first.
There is also a second dependency that will have to be in place before anyone can use the chapter. Articles 29d(4) and 29h(5) both make the exemption turn on two lists published by the Ministry on its website — one of qualifying legal forms, one of qualifying corporate taxes. Neither exemption can be claimed by an entity that is not on both. Confirming that those lists exist, and that the group's entities appear on them, is the first practical step whenever the chapter does begin to apply.
What applies to an EU parent today
Until accession, the position for a dividend, an interest payment or a royalty leaving Montenegro for an EU group company is the ordinary one:
Article 29(1) brings dividends and profit shares — paid to resident and non-resident legal persons alike — and, where paid to a non-resident legal person, interest and royalties, within withholding. Article 29(4) sets the rate at 15% of the gross amount, calculated and paid at the moment of payment.
Relief comes only from a treaty, and Article 29a(1) makes it conditional on two things together: the non-resident must prove residence in a state with which Montenegro has concluded a double taxation treaty, and must be the beneficial owner of the income. Article 29a(2) requires the residence to be proved to the payer by a certificate or equivalent document certified by the competent authority of the other contracting state. Article 29a(3) places the cost of getting it wrong on the payer: where the treaty is applied without those conditions being met and less tax results, the payer pays the difference.
So the certificate discipline an EU group will need after accession is, in substance, the discipline it needs now — only the instrument changes, from a treaty certificate under Article 29a(2) to a conditions certificate under Article 29f(1).
The question the text does not answer
One point will matter on the first day the chapter applies, and the Act does not address it.
Both exemptions require a holding of at least 24 months — 25% under Article 29d(3), 10% under Article 29h(2). The Act does not say whether a holding period running before the chapter begins to apply counts towards those 24 months, or whether the clock starts on accession day.
The difference is two years of withholding on every intra-group payment for structures already in place. Nothing in Article 45a, Article 29d or Article 29h resolves it, and it is the kind of question that is typically settled by the implementing rulebook or by the tax authority's first ruling rather than by the statute. A group holding a Montenegrin subsidiary should treat the answer as open rather than assume the favourable reading.
Until then, the honest summary of Montenegro's position is narrow. The exemptions exist, they are drafted in detail, and they are dormant. The number that applies to a payment made this year is 15%, reduced only by a treaty, evidenced only by a certified certificate, at the payer's risk.
If your group holds a Montenegrin subsidiary or lends into one, our international tax work covers the treaty route that applies today and the certificate discipline both regimes require, and corporate law covers the holding structure the thresholds are measured against.
