Published on and written by Cyril Jarnias
Montenegro has established itself in just a few years as one of the most talked-about real estate markets in Europe. Prices still lower than neighboring Croatia, the prospect of European Union membership, and relatively mild taxation: the combination is attracting more and more French buyers, whether they are simply non-resident landlords or candidates for a change of tax residence.
The net profitability of a real estate investment in Montenegro (apartment in Budva or chalet in the north) depends on the taxation of rental income and capital gains, both in Montenegro and in France, according to the rules of the Franco-Montenegrin tax treaty.
Tax residence, place of taxation, and the role of the treaty
Before even talking about rent or capital gains, you need to know who has the right to tax what. Two logics overlap: the domestic law of each country and the tax treaty between France and Montenegro.
French tax resident, Montenegrin resident: what changes
Under French law, a non‑resident is taxable in France only on their French-source income, notably rental income from properties located in France, French real estate capital gains, or certain pensions. Conversely, a French tax resident is taxed on their worldwide income, subject to international treaties.
To be considered a Montenegrin tax resident, you must meet at least one of the following conditions: have a home in the country, have your center of personal and economic interests there, or stay at least 183 days per year. In practice, the administration requires both holding a legal residence permit and an actual presence of more than 183 days, especially during the first year.
A French investor can therefore find themselves in three typical situations:
– French tax resident, non‑resident in Montenegro.
– Montenegrin tax resident, non‑resident in France.
– Intermediate cases (change of residence, dual‑home households) where the treaty resolves residence conflicts.
From a real estate tax standpoint, one point is constant: income and capital gains from a property located in Montenegro are, in the first instance, taxable in Montenegro. This is a classic principle of treaties based on the OECD model.
The France–Montenegro tax treaty (inherited from the former treaty with Yugoslavia)
Montenegro and France are linked by a double taxation treaty, originally derived from a treaty signed with Yugoslavia. This treaty aims to avoid the same income being taxed twice, and to govern how each state collects tax.
In the real estate field, the treaty applies classic principles:
– Income from real estate (rent) is taxable in the state where the property is located.
– Gains from the alienation of real estate are taxable in the state where the property is located.
– The country of residence of the taxpayer (France, for a French person who remains a French resident) must then avoid double taxation by granting a tax credit or exemption, depending on the method adopted in the treaty.
For the France–Montenegro pair, the scheme described in the sources is that of a tax credit: France may tax the income, but the French taxpayer receives a tax credit equal to the tax paid in Montenegro, up to the amount of French tax attributable to that income.
Rental income in Montenegro: local framework
For a French person buying a seaside apartment or a tourist property in Podgorica, the first source of income will be rent. Montenegrin taxation is, on paper, relatively simple: the general principle is a 15% tax on the net base, with standard deductions depending on the type of rental.
Rate and taxable base
Montenegrin law considers rent as taxable income under personal income tax (PIT) or, for a company, under corporate income tax. For individuals, the following rules emerge from the texts:
– The general rate on rental income is 15% on the net base.
– The net base is calculated as the difference between collected rents and expenses related to the property.
– When the landlord does not document all their expenses, they can apply flat‑rate costs: 30% for long‑term rentals, and 50% to 70% for tourist (short‑term) rentals depending on registration.
The Montenegrin tax authorities only tax 70% of gross rent in standard rentals.
We can summarize these mechanisms in a first table:
| Type of rental | Standard deduction on gross | Taxable base | Legal rate | Effective rate on gross rent |
|---|---|---|---|---|
| Long‑term (residential) | 30% | 70% of gross rent | 15% | 10.5% |
| Short‑term/tourism – 50% deduction | 50% | 50% of gross rent | 15% | 7.5% |
| Short‑term/tourism – 70% deduction | 70% | 30% of gross rent | 15% | 4.5% |
In some older or targeted documents, a 9% rate on rent is still mentioned, with a 40% deduction. This gave an effective rate of 5.4% of gross. However, the income tax reform aligned rents with the 15% bracket for this type of income. Therefore, the 15% rate should be considered the current reference for landlords.
Example calculation for a French non‑resident landlord
A French non‑resident in Montenegro receives €18,000 in gross annual rent from an apartment rented year‑round.
– Standard long‑term deduction: 30% of €18,000 = €5,400.
– Taxable base: €18,000 – €5,400 = €12,600.
– Montenegrin tax at 15%: €1,890.
The effective rate is therefore close to 10.5% of gross rent.
If instead it is a registered tourist rental benefiting from a 70% deduction:
– Deduction: 70% of €18,000 = €12,600.
– Taxable base: €5,400.
– Tax at 15%: €810, i.e., an effective rate of 4.5% of gross.
Some simulations use a nominal rate of 9% with a 40% deduction, resulting in a very low tax burden of 5.4% of gross. These figures show that, thanks to generous deductions, the actual tax on rents in Portugal remains significantly lower than that applied in France after adding social contributions, a major advantage for high‑income French landlords.
Reporting obligations and non‑residents
Rents must be declared once a year via the Montenegrin income tax return. For an individual, the deadline for the 2024 tax year is set at the end of April 2025 in the provided texts. Non‑residents, including French nationals, are subject to the same 15% rate on their Montenegrin‑source income as residents, meaning equal treatment in terms of rate.
Investors must however pay attention to: diversifying their portfolio, assessing the risks associated with each investment, and considering the desired investment horizon.
To carry out rental activity in Montenegro, you must obtain a tax identification number (PIB), comply with local formalities such as registering the lease or tourist registration for short‑term rentals, and keep receipts for expenses if you opt for the deduction of actual costs instead of the flat‑rate deduction.
VAT and tourist tax on short‑term rentals
The taxation of seasonal rentals is not limited to income tax. Two additional layers may apply:
– When annual short‑term rental income exceeds €30,000, the operator must register for VAT.
– The VAT applicable on rents is 21%, which increases the cost for hosts but allows recovery of VAT on certain expenses, subject to local rules.
– In parallel, a tourist tax is due for each overnight stay, generally between €0.10 and €1 per adult per night depending on the municipality. It is collected from tourists and remitted to local authorities.
The following table summarizes the main thresholds and rates for a French person operating a short‑term rental property:
| Parameter | Rule in Montenegro |
|---|---|
| VAT registration threshold | €30,000 rental turnover/year |
| VAT rate on rents | 21% (if mandatory VAT registration) |
| Tourist tax | €0.10 to €1 / night / adult (depending on municipality) |
| Income tax on rental income | 15% on net base (50–70% deduction) |
For a French person, these obligations come on top of French requirements (worldwide income declaration, possible social contributions), but the tax treaty prevents full cumulative taxation of Montenegrin and French taxes.
Real estate capital gains in Montenegro: 15% on net gain
Upon resale, an investor faces another tax: the capital gains tax. Montenegro has a simple regime: a rate of 15% on the gain, with several important exemptions.
Calculation of taxable capital gain
The capital gain is defined as the difference between the sale price and the total acquisition cost, increased by justifiable expenses and renovation costs. Formally, the taxable gain for an individual is calculated as follows:
> Net gain = Sale price – (Purchase price + acquisition costs + documented improvement expenses)
Acquisition costs include notably:
– Transfer tax (Real Estate Transfer Tax – RETT).
– Legal fees.
– Notary fees.
– Cadastral registration fees.
Improvement expenses cover significant renovation work, major repairs, extensions, and any interventions that durably increase the property’s value, provided they are properly documented.
Once this net gain is determined, it is taxed at a flat rate of 15%, for both residents and non‑residents.
Key exemptions: principal residence, family, transfers
Despite this 15% rate, Montenegrin law provides a series of exemptions that can, in some cases, completely eliminate the taxable capital gain.
Four cases are of particular interest to French investors
Description of the first case for French investors
Description of the second case for French investors
Description of the third case for French investors
Description of the fourth case for French investors
– Full exemption for the sale of the principal residence: the sale of the taxpayer’s main home is completely exempt from capital gains tax, regardless of the amount of gain or holding period, provided proof of primary occupation.
– Exemption for transfers between spouses: no capital gains tax is due when the property is transferred between spouses.
– Exemption for transfers between parents and children, or between civil partners.
– Exemption in the event of transfer by death (inheritance) or upon divorce, when the transfer of property results from the settlement of the separation.
Montenegro applies a 15% rate to speculative or investment transactions, while family‑related or principal residence transactions are largely exempt from this tax.
Confusion about a possible exemption after 3 or 5 years
Some sources mention an exemption from capital gains after a certain holding period (3 years or 5 years). Others specify that there is no distinction between short‑term and long‑term gains and that the 15% rate applies regardless of holding period.
Caution is therefore needed:
– The solid rule, confirmed by several texts, is a 15% rate on the net gain, together with targeted exemptions (principal residence, family, inheritance…).
– Any reference to an automatic exemption after a number of years of holding should be verified against the texts in force at the time of sale, with the help of local counsel.
For a French person, security comes from documenting costs, properly qualifying the use of the property (principal residence or not), and checking the rules at the time of sale.
Purchases, transfer taxes and VAT: the entry cost
Beyond taxes on rents and capital gains, entering the Montenegrin market also involves transfer taxes (Real Estate Transfer Tax – RETT) or, for new builds, VAT.
Resale properties: progressive transfer tax
So‑called “resale” properties (resale between individuals or sales not subject to VAT) incur a transfer tax payable by the buyer, calculated on the market value as determined by the tax authorities.
The system is progressive:
| Property value bracket | Tax calculation formula |
|---|---|
| Up to €150,000 | 3% of the value |
| From €150,001 to €500,000 | €4,500 + 5% of the amount over €150,000 |
| Over €500,000 | €22,000 + 6% of the amount over €500,000 |
An example illustrates this tax burden: for a property worth €750,000, the transfer tax amounts to €37,000 according to the provided calculations. In practice, add notary fees, legal fees, cadastral registration fees, and, if necessary, translation costs. Total transaction costs therefore amount to around 4 to 5% of the price for resales.
New builds: VAT at 21% instead of transfer tax
When purchasing a new build directly from a developer (first transfer of ownership of a new building), the rule is different:
– The sale is subject to VAT at the standard rate of 21%.
– In this case, the transfer tax is not due.
For an individual investor, a new purchase is subject to 21% non‑recoverable VAT, while a resale purchase incurs a 3 to 6% transfer tax. This difference directly impacts the budget, especially when it is tight.
Annual holding tax: property tax
Once a property owner, a French investor must pay a local property tax each year. It is calculated on the cadastral or market value of the property, at a rate set by the municipality within a framework determined by the state.
The essential parameters to configure are listed below.
Description of the first key parameter.
Description of the second key parameter.
| Element | Montenegro |
|---|---|
| Basis of calculation | Market/cadastral value of the property |
| “Standard” rate range | 0.25% to 1% |
| Estimated average level (residential) | Around 0.4% to 0.6% for many properties |
| Highly tourist coastal areas | Rates may reach the cap of 1% |
| Possible local reductions | Reliefs for seniors, disabled persons, targeted zones |
As an order of magnitude, an annual budget of €500 to €2,000 is cited for residential properties with a value between €200,000 and €300,000.
For comparison, the data places Montenegro at a level of property taxation lower than that of France, where annual property taxes tend to be between 0.5% and 1.5% of the value.
Comparison with French taxation on income and capital gains
To assess the appeal of an investment in Montenegro, a French person must compare the Montenegrin tax burden with what they would bear on an equivalent property in France, also taking into account the tax treaty, French social contributions, and the IFI (wealth tax on real estate) if applicable.
In France, a tax resident receiving rent is taxed under the progressive income tax scale (0 to 45%) after deductions and, if it is real estate income, also bears social contributions that can reach 17.2% for non‑residents. On a French property, the combined rate (tax + social contributions) can easily exceed 30% for a household in the middle or upper brackets.
In Montenegro, even taking the legal rate of 15% without any additional social charges, the tax pressure is lower, especially since the standard deductions of 30 to 70% reduce the taxable base.
The minimum combined rate (tax and social contributions) applied to French real estate income for non‑residents outside the EU is 37.2%.
Capital gains: 15% in Montenegro vs. 19% and more in France
In France, the real estate capital gain of a non‑resident is taxed at a rate of 19%, plus, in principle, social contributions of 17.2%, i.e., a theoretical overall rate of 36.2%, before taking into account deductions for holding period. France applies a system of progressive deductions on the base of the gain, leading to full exemption from income tax after 22 years of holding and exemption from social contributions after 30 years.
Montenegro, on the other hand, does not practice this type of graduated deduction but a flat rate of 15% on the net gain, effective from the first euro (apart from the exemption cases already described). For an investor who resells after a short or medium period, the effective rate can therefore be significantly more favorable than in France, since the gap from 15% to 36.2% is notable.
This difference in treatment is reflected in a comparative table of the main real estate taxes:
| Element | Montenegro | France (non‑resident) |
|---|---|---|
| Capital gains tax | 15% on net gain | 19% + 17.2% social contributions (36.2%) |
| Rental income tax | 15% on net base (after deduction) | Progressive scale (up to 45%) + PS 17.2% |
| Transfer tax | 3% to 6% (progressive on resale) | 5.8% to 7.5% |
| Property tax | 0.25% to 1% | 0.5% to 1.5% on average |
| Wealth tax on real estate | No specific wealth tax | IFI above €1.3M in real estate assets |
Tax treaty and tax credit on the French side
For a French person who remains a tax resident of France, the Montenegrin tax paid on rents and capital gains does not mean double punishment. France, through the treaty, grants a tax credit equal to the tax paid in Montenegro, up to the amount of French tax calculated on that same income.
Income and capital gains from Montenegro are included in the worldwide income base of the French tax household, which may increase the average French tax rate. Even if France does not necessarily tax these flows, the investor must take this into account in their declaration.
– Report in France the rents and capital gains from Montenegro.
– Indicate the tax already paid in Montenegro.
– Benefit from the corresponding tax credit, which offsets all or part of the French tax that would have been due on that income.
The final effect depends on the overall income structure of the household: Montenegro can thus offer a milder environment locally, but the impact on the average French tax rate requires a comprehensive calculation.
Montenegrin tax residence: a structural choice for some French people
Beyond simple rental investments, some French people consider Montenegro as a future center of life and tax residence. In this case, the question is no longer just about local real estate income, but the taxation of all worldwide income in a country that practices relatively moderate rates.
Conditions for obtaining residence and tax residence
Montenegro allows foreigners to obtain a temporary residence permit for one year, renewable in several situations, notably:
– Based on property ownership;
– Through an employment contract or self‑employment;
– Through a significant real estate investment (residence by investment programs).
The minimum real estate investment threshold of €250,000 in the north or center of the country to qualify for a residence program, while an investment of €450,000 is required on the coast or in Podgorica.
To become a tax resident, having a residence permit is not enough. You must also:
– Spend at least 183 days a year in the country, or
– Prove that Montenegro is the center of your vital interests (personal and economic).
Once these conditions are met and registration with the tax authorities completed, the person is taxable in Montenegro on their worldwide income. The country then applies a progressive scale of 0%, 9% and 15% depending on income level, with a tax‑free threshold for low incomes.
Advantages and limitations of Montenegrin tax residence for a French person
For a French person who effectively transfers their tax residence, Montenegro highlights: an attractive tax framework, competitive tax rates, and an appreciated quality of life. Moreover, the country offers advantages for expatriates and a business‑friendly environment.
Discover the main strengths of the Montenegrin tax system, designed to attract investors and residents.
No tax is levied on personal wealth, offering optimal asset protection.
Progressive income tax rates from 0 to 15%, easing the tax burden on taxpayers.
Capital gains and financial income are taxed at a favorable flat rate of 15%.
Residents benefit from equal tax treatment with Montenegrin citizens.
These elements can appeal to taxpayers who are heavily taxed in France, especially those subject to IFI or the “flat tax” of 30% on capital income (single flat‑rate levy). The trade‑off is twofold:
– It is necessary to break the criteria for French tax residence (which implies, among other things, no longer having your main home in France and limiting your days of presence).
– Managing the exit from France sometimes involves mechanisms such as the “exit tax” on unrealized capital gains upon departure, for certain significant securities portfolios.
Montenegrin tax residence is therefore a structural choice, justified only for specific wealth and family situations, but it clearly fits into the landscape of European tax planning.
Tax treaty and tax credit: concrete mechanism for a French landlord
Returning to the most common situation – a French resident in France who owns an apartment in Montenegro, rents it out, and may sell it one day – allows a practical summary of the interplay between Montenegro and France.
Rental income flow
1. The French landlord receives rent in Montenegro. 2. They declare this rent on their Montenegrin return, apply the standard deduction or actual expenses, and pay 15% on the net base. 3. In France, they also declare this rent as foreign‑source income, integrating it into their worldwide income. 4. The treaty provides that they receive a tax credit equal to the Montenegrin tax paid, offsetting, up to the amount of French tax due on that income, the risk of strict double taxation.
The investor is not doubly taxed, but the foreign rents included in their global income may increase their average tax rate in France.
Capital gain flow
The mechanism is similar:
Upon sale, the capital gain is taxed at 15% in Montenegro. The French seller resident in France must also declare it in France, but they benefit from a tax credit for the Montenegrin tax to avoid double taxation and limit the final tax burden at the French level.
From a net yield perspective, the impact can be very favorable if the effective Montenegrin rate (15% on net gain) is lower than the combined rate the property would have incurred in France (19% + 17.2% social contributions before holding‑period deductions).
An overall attractive environment, but one that requires method
The overall data from the texts paints a clearly competitive Montenegrin tax environment for real estate:
– Moderate tax rate on rents (15% on base reduced by deductions).
– Capital gains taxed at 15% on the net gain, with many family or principal residence exemptions.
– Moderate transfer taxes compared to some Western European countries.
– Annual property tax in the lower range of European standards, especially outside premium coastal areas.
– No specific tax on overall real estate wealth (no equivalent of IFI).
For a French person, the advantage is reinforced by the tax treaty that avoids double taxation and allows an arbitrage between a milder local tax system and a heavier French tax system.
This landscape, however, does not dispense with great rigor in implementation:
Complete documentation of renovation costs and acquisition expenses is essential to optimize the capital gains base. Registration procedures (tourist rental, VAT, tourist tax) must comply with local thresholds and requirements. The French declaration of Montenegrin income and capital gains must be accurate, with mention of the tax already paid, in order to secure the tax credit. Any consideration of a change of tax residence must be coordinated with French legislation (exit tax and retention of ties with France).
Montenegro, in the midst of a dynamic EU accession process and already equipped with a clear real estate tax system, thus offers favorable ground for French people ready to approach the issue with figures, texts, and appropriate legal support, rather than with mere impressions of a “tax haven.” For those who prepare seriously, the combination of a market still catching up and measured taxation can turn a real estate opportunity into a genuine long‑term wealth strategy.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
