Citizens who purchase government bonds will not pay income tax on the earnings from these investments, as the Law on Personal Income Tax is set to be amended in the coming months, the Ministry of Finance announced.
On November 3, Montenegro will issue domestic government bonds worth €50 million for its citizens, with a two-year term and an annual yield of 3.75%. For example, an individual who buys €1,000 in bonds will earn €37.50 per year, or €75 over the two-year period.
Under the current Law on Personal Income Tax, income from capital—including interest and bond yields—is taxed at a rate of 15%. However, a working group formed by the Ministry of Finance is preparing amendments to the law that will, among other changes, exempt income from government-issued bonds from personal income tax by the end of the year.
The sale of government bonds allows the state to borrow from individuals, who are entitled to annual interest and the return of principal at maturity, in this case on November 4, 2027.
Finance Minister Novica Vuković stated that the annual yield on these bonds is higher than current bank deposit rates, offering citizens a better opportunity to invest their capital while enabling the state to borrow at a lower cost.
According to the Central Bank, the highest average deposit rate in Montenegrin banks in August was 2.33% for five-year term deposits. The proposed bond yield is roughly one-third higher. Additionally, interest from bank deposits is taxed at 15%, while income from government bonds will be tax-free if the amendments are adopted by year-end.
For example, a citizen depositing €1,000 in a bank would earn a net annual income of €19.80, while the same amount invested in government bonds would yield €37.50.
As of the end of August, Montenegrin citizens held €2.32 billion in bank deposits, of which €387 million was in term deposits and €1.93 billion was on demand. Only €41.5 million—or 1.7% of total deposits—was invested in deposits with a term of three years or more.
