Montenegro is preparing one of the most significant overhauls of its VAT framework in years, with the Government drafting a new VAT law designed to align the country’s tax regime with European Union rules governing the digital economy, cross-border e-commerce and online platforms. The proposed legislation signals a structural shift in how Montenegro intends to regulate short-term accommodation rentals, digital services, cloud businesses, IT companies and internet-based commerce ahead of eventual EU accession.
The draft law introduces entirely new VAT treatment models for digital intermediaries such as Airbnb, Booking and online marketplaces, potentially transforming the tax obligations of platforms operating in Montenegro’s rapidly expanding tourism and digital sectors. Under the proposed framework, platforms facilitating accommodation rentals, transport services or online commercial transactions could, in certain cases, be treated as if they were the direct supplier of services themselves, making them responsible for VAT calculation and collection.
The move reflects a broader European trend in which governments are attempting to close regulatory and tax gaps created by the expansion of digital business models. For Montenegro, however, the implications are particularly significant because tourism-linked short-term rentals and informal online commerce have become major components of the domestic economy over the past several years.
The proposed legislation places strong emphasis on regulating electronic services, online sales, cross-border internet trade, cloud infrastructure services and digital platforms. The draft also introduces a €10,000 threshold for certain cross-border digital services and e-commerce activities, mirroring mechanisms already used within the EU VAT system. This effectively means Montenegro is beginning to operationally integrate parts of the European VAT architecture even before formal EU membership.
For the accommodation market, the changes could materially reshape the economics of short-term rentals. Montenegro’s tourism sector has experienced an explosion of apartment-based tourism accommodation, much of it operating through international booking platforms. Authorities now appear determined to tighten visibility over those flows, increase fiscal collection efficiency and reduce the informal economy connected to private accommodation services.
The draft legislation also expands regulation of real estate transactions and construction land. New rules are expected to define VAT treatment for construction land sales, newly built apartments, property-linked transactions and VAT deduction mechanisms tied to specific real estate activities. This is particularly relevant because real estate and tourism-related construction have become some of the dominant drivers of Montenegro’s GDP growth and foreign investment inflows in recent years.
The proposed VAT reform arrives at a sensitive moment for Montenegro’s property and tourism markets. The country has already introduced tighter anti-money laundering rules requiring property transactions above €10,000 to be processed exclusively through domestic banking channels, creating operational concerns among foreign investors and real estate intermediaries. Industry representatives have warned that stricter financial and regulatory requirements could slow transaction activity, especially among non-resident buyers who face difficulties opening local bank accounts.
For Montenegro’s IT and digital services sector, the reforms signal both increased regulation and increased legitimacy. Cloud services, AI-linked services, SaaS models and cross-border digital providers are now being formally integrated into the domestic tax framework. This creates a more predictable regulatory environment for international businesses operating in Montenegro, but it also increases compliance requirements for smaller digital firms and freelancers that previously operated in less clearly regulated spaces.
The legislation also illustrates how EU accession dynamics are increasingly influencing Montenegro’s fiscal architecture. Much of the terminology and structure embedded in the draft law mirrors European VAT concepts used across the single market, particularly around platform liability, digital service taxation and destination-based VAT principles. This alignment is strategically important because Montenegro’s future participation in the EU market will require interoperability with European tax systems, especially in digital commerce and cross-border services.
The broader economic impact could be substantial. Increased tax transparency and digital transaction traceability may improve fiscal revenues and reduce informal activity, but the transition period could create operational pressure for tourism operators, small online merchants and digital entrepreneurs. Businesses operating through platforms without formalized VAT structures may face significantly higher compliance obligations, while platforms themselves could become more cautious regarding local market exposure and reporting obligations.
For investors, the reforms indicate that Montenegro is entering a new regulatory phase in which digital economy activity, online transactions and platform-based services are becoming subject to much tighter European-style supervision. That transition may ultimately improve institutional credibility and EU integration prospects, but it also marks the end of a relatively lightly regulated environment that has characterized parts of Montenegro’s tourism and digital economy over the past decade.
