The government has decided to increase the value-added tax (VAT) rate in the hospitality sector from 7 to 21 percent, returning it to the level it was three years ago.
The reduction of the VAT rate for the hospitality sector occurred in 2020 as part of the government’s measures to support the economy three years ago.
This announcement has sparked discontent among the tourism industry, whose representatives consider it another blow to their business.
The President of the Tourism and Hospitality Association of the Chamber of Commerce of Montenegro (PKCG), Ranko Jovović, stated that they have submitted an initiative to the Ministry of Finance to postpone this provision, considering that they have already sold capacities for the winter and summer seasons.
“Now we need to factor in new fees for already sold arrangements, which I believe is impossible. This is a blow to the tourism industry, given that we have experienced significant inflation, wage increases, and rising procurement costs in the previous period. Another blow like this will be difficult for the tourism industry to withstand,” said Jovović.
He reminded that tourism stakeholders were considering the information that the reduced VAT rate for the services of preparing and serving food, drinks, and beverages, except alcoholic beverages, sugary soft drinks, and coffee in all establishments providing catering services, would apply until the end of this year.
“With amendments to the VAT Law in January this year, a limitation in the application of this measure until the end of the year is introduced, and according to the representatives of the tourism industry, it allows the use of this tax benefit only for restaurants and food delivery (catering). In other words, the sale of food through delivery is stimulated, while the sale of food in hotels and other hospitality facilities is discouraged, further endangering the business environment, especially when it comes to the development of elite tourism,” said Jovović.
He added that in such a business environment, with high procurement prices for food products, caterers and hoteliers in Montenegro cannot create competitive prices for the end guest.
