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Tax Treaty between Monaco and Montenegro has Entered into Force — Orbitax Tax News & Alerts

Monaco has published Sovereign Ordinance No. 9.818 of 9 March 2023 in the Official Gazette, which provides that the income tax treaty with Montenegro entered into force on 14 January 2023. The treaty, signed 29 May 2019, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Monaco profit tax on commercial income levied from individual persons and profit tax levied from companies. It covers Montenegrin corporate profit tax and personal income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company that directly or indirectly holds at least 10% of the paying company's capital; otherwise, 10%
  • Interest - 10%
  • Royalties - 5% for royalties paid for the use of, or the right to use any copyright of literary, artistic, or scientific work (including cinematographic films and recordings on tape or other media used for radio or television broadcasting or other means of reproduction or transmission) or computer software; otherwise, 10%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or other corporate rights deriving more than 50% of their value directly or indirectly from immovable property situated in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entitlement to the Benefits

Article 26 (Entitlement to the Benefits) includes the provision that the benefits foreseen in the treaty shall not be granted to a resident of a Contracting State that is not the beneficial owner of the income derived from the other State.

Article 26 also includes the provision that the provisions of the treaty shall not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of those provisions by means of such creation or assignment.

Effective Date

The treaty applies from 1 January 2024.