Montenegro is preparing a tighter tax framework for companies from 1 January 2027, with the most sensitive change aimed at one of the more flexible areas of corporate cash management: loans and advances from companies to individuals. The proposed amendments to the Law on Corporate Income Tax would bring such payments under stricter withholding-tax control, especially where company funds are transferred to owners, founders, managers or other related parties.
The reform may look technical, but its business impact is broader. It signals that Montenegro is moving toward a more disciplined tax environment in which informal extraction of liquidity from companies, weak documentation of loans and unclear treatment of payments to non-resident entities will become harder to sustain. For businesses, accountants, tax advisers and foreign investors, the message is clear: from 2027, corporate cash flows will need stronger documentation, clearer legal basis and more careful tax treatment.
Under the draft amendments, a corporate income taxpayer would be required to calculate, withhold and pay withholding tax on payments made on the basis of a loan or advance to individuals, regardless of whether the loan carries interest or is interest-free. The proposed rule would apply to the amount of the loan or advance above €5,000 annually. The same treatment would also apply when the repayment period of such a loan or advance is extended.
The proposed €5,000 annual threshold is important because it creates a defined tax boundary for ordinary loan arrangements with individuals. However, the draft law makes a much stricter distinction for related parties. The tax-free portion of €5,000 would not apply to related persons, meaning that loans to owners, founders, members of management bodies or other connected persons would be exposed to more restrictive tax treatment from the outset.
This is likely to be the most closely watched part of the reform by small and medium-sized enterprises, family-owned companies and businesses where owners frequently use company liquidity for personal needs through loan agreements. In practice, such arrangements can sit in a grey zone between genuine financing, temporary liquidity support and disguised profit distribution. The proposed rules would narrow that space by treating loans to individuals, especially connected individuals, as transactions requiring explicit tax attention.
For companies, the immediate operational consequence is the need for better internal records. Loan contracts, repayment schedules, board or management approvals, accounting entries, interest terms, extensions and related-party documentation will become more important. Businesses that have historically treated company-to-owner loans as an informal treasury tool will need to clean up their balance sheets before the new regime starts.
The change also has a corporate-governance dimension. In a more mature tax system, company funds are expected to be separated from personal funds, particularly where ownership and management overlap. Montenegro’s proposed rules move in that direction by making it more difficult to use corporate cash as a loosely documented personal financing channel. For banks, auditors and investors, that could improve the reliability of company accounts, especially in sectors where owner-managed companies dominate.
The second part of the proposed reform concerns non-resident legal entities that are not tax residents of Montenegro but earn certain types of income in the country. The draft law would clarify tax obligations for income generated from stage, entertainment, artistic, sports and similar programmes performed in Montenegro. This would cover a range of activities linked to concerts, festivals, cultural events, sports events and other public programmes involving foreign entities.
Under the proposed framework, a non-resident legal entity receiving such income would be required to submit a tax return through a tax representative within 30 days from the date the income is earned. The return would be filed with the competent tax authority in the municipality where the programme is performed, after which the tax authority would issue a decision.
This provision is particularly relevant for Montenegro because tourism, events and seasonal entertainment are becoming increasingly important parts of the country’s service economy. International performers, event companies, sports organisers and production entities can generate income in Montenegro without having a permanent domestic presence. The new rules would give the tax administration a clearer basis to identify, assess and collect tax from such activity.
For the events industry, the practical implication is that contracts with foreign performers and production companies will need more precise tax clauses. Organisers will have to know who receives the income, whether the recipient is a legal entity, whether a tax representative is required, how double-taxation treaty provisions may apply and whether gross or net payment terms are being used. This could increase administrative work, but it also reduces uncertainty for compliant organisers.
The draft also states that the relevant provisions and double-taxation agreements should be applied in a way that secures the more favourable tax treatment for the taxpayer. That is an important safeguard, especially for non-resident entities from countries that have tax treaties with Montenegro. In practice, however, access to treaty benefits usually depends on proper documentation, timely filing and clear proof of tax residence.
The broader policy direction is consistent with Montenegro’s gradual alignment with European administrative standards. As the country moves further along its EU accession path, the tax system is expected to become more transparent, more rules-based and less tolerant of weakly documented transactions. That does not only affect large companies. It also affects smaller domestic businesses, foreign service providers, event organisers, accounting firms and entrepreneurs using company structures.
For investors, the reform should be read as part of a wider tightening of Montenegro’s fiscal architecture. The country needs stronger revenue discipline while preserving an investment-friendly environment. That balance is not easy. Too much complexity can burden businesses, but unclear tax rules create their own cost through disputes, inconsistent treatment and reputational risk. The proposed amendments try to address two areas where ambiguity can be significant: loans from companies to individuals and income earned in Montenegro by non-resident legal entities.
The company-loan rule may have the larger behavioural effect. It directly affects how owners and related persons interact with company cash. Businesses will need to review existing loan balances, especially where loans have been repeatedly extended or left unpaid for long periods. Accountants will need to assess whether such balances create withholding-tax exposure once the new rules apply. Advisers will also need to distinguish between genuine commercial loans, shareholder loans, advances, dividend-like payments and related-party transactions.
The non-resident income rule will matter most in tourism-heavy municipalities and cities hosting major events. Coastal municipalities, Podgorica and major tourism centres could see more direct interaction between event organisers, tax representatives and local tax offices. As Montenegro’s events economy becomes more international, tax compliance will increasingly become part of the commercial structure of concerts, festivals, sports competitions and entertainment programmes.
The proposed application date of 1 January 2027 gives companies time to prepare, but not enough time to ignore the issue. Businesses should use 2026 to map all loans and advances to individuals, identify related-party exposures, review contracts with non-resident entities and update accounting procedures. The most exposed companies will be those with frequent owner withdrawals, weak documentation, unpaid shareholder loans or informal arrangements with foreign service providers.
Montenegro’s tax environment is becoming less tolerant of informal business practices. The new rules on company loans and non-resident income are a clear signal that the next phase of compliance will depend less on whether a transaction has been labelled as a loan, fee or advance, and more on whether its economic substance, documentation and tax treatment can withstand scrutiny.
