Montenegro will implement a unified VAT rate of 15% for the tourism sector starting next year, which includes an increase from 7% for accommodation and a decrease from 21% for hospitality services. Nikola Pejović, President of the Montenegro Hotel Association, warns that this change could lead to price increases of 10% to 20%.
Pejović also noted that labor costs are expected to rise due to new minimum wage laws, which could exacerbate challenges for the hotel industry. He criticized the government for not consulting with the industry before announcing the VAT changes, particularly as many hotels have struggled this season.
He expressed concerns that the increase will make Montenegro less competitive compared to regional countries with lower VAT rates, such as Albania (6%) and Croatia (13%). This could deter tourists, especially since Montenegro is already seen as a more expensive destination.
Representatives from several five-star hotels have also expressed that the VAT hike could have devastating effects on the tourism sector, emphasizing the need for dialogue with the government. They highlighted that countries with richer tourist offerings have reduced tax burdens to attract and retain investors.
Pejović reiterated that tourism is vital for Montenegro’s economy, employing over 24,500 people in accommodation and dining services. He called for better representation in government and warned that ongoing high taxes and the informal economy threaten smaller hotels’ survival.
