Buying a home is one of the biggest steps in life, but are you prepared for all the costs that come with it? One of them is the real estate transfer tax, which can often surprise those who are not familiar with the details. In this article, we will explain how the tax is calculated, who pays it, when you can be exempt, and what else you need to know before signing the contract.
What is real estate transfer tax and how is it calculated?
Real estate transfer implies any acquisition of ownership rights – whether by purchase, exchange, inheritance, gift or other means. The tax base for real estate transfer tax is the market value of the real estate at the time of its acquisition, in fact the price of the real estate that is achieved or can be achieved on the market at the time of its acquisition.
As of January 1, 2024, the real estate transfer tax in Montenegro is progressive, and amounts to:
- Up to €150.000, the tax is 3% of the purchase value.
- From €150.000,01 to €500.000, the tax is €4.500 + 5% on the amount over €150.000
- Over €500.000 the tax is €22.000 + 6% on the amount over €500.000
That's why it's important to know what value range your property falls into so you can plan your budget properly.
Who pays taxes?
In most cases, the buyer is required to pay the tax, unless otherwise agreed. This cost is not automatically included in the price of the property, so it should be calculated in advance.
When is tax not paid?
There are situations in which you are exempt from this tax:
- Buying directly from an investor (new construction): then VAT is paid instead of tax, which is most often 21% and is usually already included in the price.
- First resolution of the housing issue: if you are an adult citizen of Montenegro, who is acquiring residential real estate for the first time, for an area of up to 20 m² per household member, and you do not own any other real estate - you may be exempt from paying taxes.
What does the procedure look like?
- After signing the contract with a notary, you are obliged to submit a tax return to the competent Tax Administration within 15 days.
- The Tax Administration assesses the market value and issues a decision.
- The deadline for paying the tax is 15 days from the receipt of the decision.
- The tax is paid into the bank account of the municipality where the property is located.
- After payment, you can submit a request for registration of ownership in the cadastre.
What if you're late?
If you do not pay on time, the Tax Administration will charge late payment interest and may initiate enforcement proceedings. Therefore, it is important to carefully follow the deadlines and keep all documentation.
Additional tips:
- Request a preliminary estimate from the Tax Administration if you want to know the approximate amount before signing the contract.
- Keep proof of payment – they are needed for registration of ownership.
- Consult a notary, lawyer or agent – they can help you make sure everything goes smoothly.
Real estate transfer taxes are not complicated, but they do require attention and planning. Knowledge can save you money and avoid stress.
This text was prepared by TEAM Real Estate, and our goal is to make every step of the way to your new property easier. Do you have any additional questions? We are here for you!
Text created in collaboration with https://www.teamrealestate.me.
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