As representatives of nine hotels and resorts operating in Montenegro, with the five-star category, in accordance with the highest world standards in the field of hotel accommodation and catering, we believe that the increase in the rate of value added tax (VAT) on catering services to 15%, which is regulated by the latest amendments to the Law on Value Added Tax, have a disastrous impact on Montenegrin tourism, representatives of these hotels and resorts announced today.
"After the adoption of the proposal for the fiscal strategy of Montenegro for the period 2024-2027, where an increase in the VAT rate is foreseen, we turned to the Ministry of Finance of Montenegro in order to, through dialogue, and guided by our many years of experience in the tourism industry as well as the exceptional efforts that we make every day "We are investing in the maintenance and improvement of the exclusive tourist offer in Montenegro, influencing the change of this disastrous tax policy. However, the answer from the Ministry, which came in an informal way, was that there is no interest in listening to us because the decision has already been made," he points out. in a statement signed by Andreas Porias, general manager of One & Only Portonovi; Anthony Clement, General Manager of The Chedi Lustica Bay; Angelo Zuccala, general manager of Regent Porto Montenegro; Juan Tamames, General Manager of Mamula Island; Marina Radjenović, general manager of Heritage Grand Hotel Perast; Mykhailo Shmatov, general manager of Nikki Beach Montenegro; Dejan Perić, general manager of Hyatt Regency Kotor Bay; Nikola Milić, owner and general manager of Casa Del Mare Group and Branko Putnik, general manager of Lazure Hotel & Marina.
They added that the predicted increase in the VAT rate on catering services by over 100% will cause an inevitable increase in the prices of tourist services and that it will destroy the competitiveness of their tourist offer in the long term - especially taking into account the diversity and quality of the tourist product and the correct fiscal strategies of the countries in environment and in the Mediterranean, where tourism significantly contributes to the GDP.
"Practically all countries whose tourist offer represents competition to ours have a significantly lower rate of VAT on hospitality services compared to the rate of 15% in Montenegro," the statement of the representatives of hotels and resorts reads.
They listed VAT rates in some countries - Croatia 13%, Greece 13%, Italy 10%, Spain 10%, Portugal 6%, Turkey: 8%, France 10% and Albania: 6%.
"The mentioned countries, almost all of which have a much richer tourist offer than Montenegro, have, in order to encourage this important branch of activity, reduced the tax burden, in order to attract and retain investors and tourism workers and thereby preserve the branch of the economy that provides a huge part of the income to On the other hand, in a situation where our tourism product is so fragile, unstable, and still needs to be developed and positioned on the market, the increase in prices due to the increase in levies will undoubtedly cause tourists to go to other, more attractive and cheaper destinations. will represent a huge blow to our tourism," the announcement reads.
The representatives of nine hotels and resorts said that it cannot be expected, nor is there any economic logic, that investors and travel agencies, by reducing their profits, will maintain the competitiveness of Montenegrin tourism, especially taking into account the numerous logistical, infrastructural and institutional obstacles with which already face and which, inevitably, negatively affect the quality of the offer.
"We especially emphasize the small capacity and disorganization of the airports in Podgorica and Tivat (for example, the airport in Tirana has several times more flights per day than both our airports combined) as well as the constant crowds and impassability on the coast due to the lack of modern roads, while the hygienic/communal moment is redundant. and comment," said a statement from representatives of nine hotels and resorts.
They stated that also, with the changes introduced by the new Branch Collective Agreement for Tourism and Hospitality ("Official Gazette of Montenegro", No. 056/24 dated 13.06.2024), the scope of obligations of employers in tourism has been significantly increased, including an increase in the special part of earnings and severance pay upon retirement, mandatory payment of winter leave and jubilee benefits, transportation costs and other benefits.
"Amendments to the Labor Law ("Official Gazette of Montenegro", No. 077/24 of 05.08.2024) which reinstated the minimum duration of employment contracts for a fixed period of 24 months represent an additional aggravating factor. At the same time, category five hotels star hotels, according to the provisions of the Law on Tourism and Hospitality, are obliged to operate throughout the year, i.e. during the off-season when tourist demand is almost non-existent and the losses run into millions - to countries that know how to recognize the value of a quality tourist offer," the announcement reads.
The representatives of nine hotels and resorts stated that the increase in the VAT rate will not improve the business environment, strengthen the competitiveness of the economy and attract investments (which is the goal of the fiscal strategy), but will produce the exact opposite effect.
"As for the negative consequences in the short and medium term, an increase in the VAT rate - and in such a short term, without any preparation of tourism workers and the public, will have a catastrophic effect on tourist arrangements that have already been contracted for the following year with the current VAT rate applied, because we will be forced to explain to clients what is the reason for the increase in the price of the arrangement - which will create a bad image of the tourist offer in Montenegro and reveal the state's frivolous attitude towards the most important branch of activity", said the representatives of nine hotels and resorts.
They claim that their goal is "as a representative of the most important economic activity in Montenegro, that, in addition to preserving our business, we certainly additionally contribute to the stability of public finances".
"However, unilateral decision-making in strategy planning and hasty legal solutions will negatively affect our business, threaten the entire tourism product in Montenegro and, consequently, the stability of public finances. Increasing VAT without adding any value to the destination (on the contrary), is disastrous Therefore, we invite all competent authorities in Montenegro to, with our full support and on the basis of public dialogue and constructive cooperation with all actors in the tourism industry, once again consider this situation and adopt an optimal fiscal strategy and legal solutions that will be in the interest both of all our tourism workers and of the state of Montenegro", concludes the statement of representatives of nine hotels and resorts.
On September 6, the Parliament of Montenegro voted on the Proposal for the Law on Amendments to the Law on the Budget of Montenegro for 2024, the Proposal for the Law on Amendments to the Law on Value Added Tax, the Proposal for the Law on Amendments to the Law on Corporate Profit Tax , Proposal for a Law on Amendments to the Law on Personal Income Tax, Proposal for a Law on Amendments to the Law on Mandatory Social Insurance Contributions and Proposal for a Law on Amendments to the Law on Excise Taxes.
On September 11, the President of Montenegro, Jakov Milatović, returned the Law on Amendments to the Law on Value Added Tax and the Law on Amendments to the Law on Excise Taxes to the Parliament for reconsideration.
When it comes to the Law on Amendments to the Law on VAT, the explanation states that the proposed legal amendments raise the reduced VAT rate to 15 percent for certain products and services from the tourism, culture and art sectors. Also, the law foresees the collection of VAT on the import of shipments of insignificant value, up to the amount of 75 euros.
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