NewsMontenegro, tax, fiscal and corporate changes

Montenegro, tax, fiscal and corporate changes

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The Ministry of Finance is preparing a set of laws and measures with the aim of increasing budget revenues, which will relate to higher taxation of luxury and highly profitable activities, suppression of the gray economy in the
area of games of chance and real estate issuance, prevention of fraud in the obligation to pay capital gains tax and extracting money from companies through loans to owner and related persons…

This was announced at yesterday’s working breakfast of Finance Minister Aleksandar Damjanović and his associates with journalists. The focus of all measures is on increasing income and creating savings, in order to compensate part of the losses of the state budget due to the abolition of health insurance contributions and part of the wage tax through the Europe Now program and reduce the budget deficit.

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Already in December, amendments to the law on income tax were adopted, which give the Revenue Administration greater powers in checking calculations and collecting tax on capital gains, as well as amendments to the law on profits of legal entities, which introduce a tax on loans that natural persons receive from companies. The preparation of by-laws on these two laws is being completed. Amendments to the laws on games of chance and the prevention of illegal business are being prepared, while solutions are being worked on with partners from the EU on additional taxation of luxury products and highly profitable activities in accordance with EU recommendations.

Introduction of e-visitors

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State Secretary in the Ministry of Finance Ilija Vukčević said that they are preparing the introduction of the e-visitor system, following the example of Croatia and EU countries, which connects hotels and other accommodation providers with the border police system. So that the tax authorities will have insight into where that guest is staying, whether the provider of the accommodation has paid the residence tax and VAT on the accommodation for him, how many guests he had and whether and how much he paid in profit tax at the end.

Damjanović said that the goal is to provide enough money for the functioning of the health system and all other public needs, reduce the gray economy and enable normal business operations of the economy. He expects citizens to be the best controllers, to take bills, not to use the gray economy and to report all irregularities, because this is the only way to improve the quality of life in Montenegro.

They will control the sale of Bemaks

The Minister said that the Revenue and Customs Administration will check the sale of Bemaks and determine the amount of capital gains tax that should be paid in accordance with the new legal solutions. In October of last year, the news announced that the previous official owner of Bemaks, Veselin Kovačević, sold a 100% stake in that company to Ivan Ubović for EUR 750,000, although the company’s official balance sheets estimated the value of the capital at EUR 142 million and retained earnings at EUR 141 million.

In December, the government proposed an amendment to the law on personal income tax, which foresees the possibility for the Revenue and Customs Administration to determine the actual sales value of shares in a legal entity if the sales value in the purchase agreement is lower than the market value. The Assembly adopted that proposal as well as the amendment of the SNP deputies’ club on determining the public interest that this article applies retroactively from January 1, 2018.

Damjanović said that in accordance with the legal obligation of the tax authorities, they will check all disputed sales of companies and shares in them in this period and will do so in the future, so that those who have the most pay minimum tax obligations or avoid them. Vukčević, explaining this new law, said that the focus in the coming months will be on increasing income, and that this is one of the legal solutions to that end.

– The value of shares in the companies that were sold will be reassessed, and where there is a difference, the new amount of the seller’s tax liability will be determined – said Vukčević. He stated that the law has retroactive effect in the previous period of five years.

How tax will be paid on loans from companies

The news is that this year a tax of 15% will be paid on loans that companies give to individuals.

– This avoids situations that currently exist where the company owner borrows the company’s money to himself, constantly extends the repayment terms, never pays taxes, and leaves the company in debt. The purpose of the company’s existence is not to give loans to natural persons – said Vukčević.

At the end of last year, a group of SNP deputies proposed this amendment to the law on profits of legal entities, where this amount of tax is charged on all loans to natural persons, and the ministry is obliged to pass by-laws within 90 days. The Ministry of Finance then gave a positive opinion for this amendment to the law.

– The person liable for income tax is obliged to calculate, withhold and pay the withholding tax on payments made on the basis of a loan, i.e. a loan with or without interest to natural persons, as well as in the case of extending the loan repayment period, i.e. a loan – it is stated in the law.

In the case where the loan agreement was signed before the entry into force of this law, which was adopted and entered into force at the end of December, the debtor is obliged to calculate and pay the tax after the end of the period for which the agreement was concluded, or if they conclude a new agreement extends that period.

Vukčević said that the goal of this measure is not only to collect the amount of tax on these disputed loans, but to stop this practice and to introduce taxpayers to regular flows, that is, to declare this money as profit, pay tax on it, and then raise for themselves. He expects that this novelty will affect the regularity of business operations of legal entities and better collection of profit tax.

Damjanović said that this was one of the ways in which those who have the most avoided paying their obligations and had poor companies with tax debts.

Jack pot to pay two million if he wants to work

The minister said that two days ago he signed a decision rejecting the second extension of the concession to the Jackpot company for the casino in the Falkeinsteiner Hotel in Bečići without paying the concession fee of two million euros.

He stated that the law Is very clear for casinos – you pay a fee of two million euros, you get a ten-year concession that can be extended once to five years, and after that you have to pay another two million for a new concession. As he explained, a new competition for a casino concession will now be announced, to which an existing or a new organizer can apply, but they will have to pay a starting fee of two million euros.

Damjanović answered this to the question of Vijesti whether he will act on the adopted amendment of the Democrats, which stipulates that the Revenue and Customs Administration, within 90 days from the date of entry into force of this law, will verify all facts important for the payment of a one-time fee of two million euros.
He stated that It was not possible to react earlier due to the decision of the Commercial Court from February last year on the introduction of a temporary measure, which was abolished by the Council’s judgment only in November. The owners of Jack Pot are businessmen Branislav Brano Mićunović and Sava Džigi Grbović.

Higher taxation of online gaming

Vukčević said that the new law on games of chance has been submitted to Brussels for evaluation.

– Given that this procedure could last until the end of the year, and that there is a need for urgent reactions in this area, we are making changes to the existing law, which we will submit to the Parliament during the spring session. There is a need for greater tax coverage of online games of chance, expansion of state online supervision over organizers because two-thirds are not included, definition of the obligation to pay taxes on income from abroad, which some now pay and some do not – said Vukčević.

He said that they are also planning the fiscalization of the entire field of games of chance, as well as making analyzes of changes in the concession policy and the amount of fees.

Damjanović stated that Montenegro now earns 15 to 16 million per year from fees for organizing games of chance, but that according to the comparison of charges in Serbia, Croatia and the size of the market, that amount should amount to 30 to 40 million EUR. He also said that the existing law from 2004 has outdated norms on online games of chance.

Because of Europe, there is now a loss in the budget of 133 million

– If there was no inflation, we would have had a collapse of public finances last year due to the experiment with the abolition of contributions through the Europe now program – said Damjanović.

He said that when the Constitutional Court is formed, his ministry will submit a proposal for an assessment of the constitutionality of the amendments to the law that abolished the collection of contributions for health insurance, because mandatory social contributions are a constitutional category.

– Last year we had a shortfall in the collection of contributions of EUR 90 million and a loss of EUR 43 million due to the direction of income tax to municipalities as a compensation for the losses they had due to the Europe Now program. If there was no increase in VAT collection of EUR 216 million, mostly due to inflation and fiscalization that I started while I was the director of the Revenue Administration, we would have had a collapse of public finances – said Damjanović.

He stated that, as a member of parliament and president of the parliamentary committee for economy, he had advocated for the reduction of wage taxes for years, but not in this way without any analysis, but with serious studies and gradually as proposed by the International Monetary Fund (IMF).

When asked whether there will be an agreement with the World Bank and whether it will carry some restrictive measures, Damjanović said that there are no demands such as lowering salaries and pensions, but that it refers to the adoption of new acts, the formation of the fiscal council, the green agenda , defining the financing of the public health system and the like.

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