The Ministry of Finance has adopted a regulation that once again exempts owners of yachts and other vessels from paying excise duty on fuel, with the explanation that they are doing so as an incentive for the development of nautical tourism.
The amount of excise duty on fuel is now 33 to 44 cents per liter, and it is included in the VAT calculation base, so owners of luxury vessels will once again pay for fuel significantly cheaper than citizens.
The owners of these vessels were exempt from excise duties until June 2022, when excise duties were introduced for them at the proposal of the then Minister of Finance Aleksandar Damjanović. The ministry then calculated that from 2018 to July 2022, the state budget lost around 59 million euros due to unpaid excise duties and value added tax (VAT) on the sale of fuel for yachts and ships.
They reduce for yachtsmen, they increase for citizens
The Rulebook is published on the Government's website, and enters into force on the day of its publication in the Official Gazette. The Ministry did not say how much this measure will affect the reduction of budget revenues. In January, a fee of three cents per liter of fuel for citizens and the economy, which is intended for the creation of oil reserves, will come into force. From the New Year, through the "Europe Now 2" program, excise taxes on wine, a portion of sweets and carbonated beverages, as well as the VAT rate on books, hotel accommodation...
The full name of the new rulebook is - Rulebook on the manner of carrying out the customs procedure for goods used for the supply of means of transport in international traffic, the type of goods and quantity restrictions, which prescribes in detail the way of supplying vessels and aircraft with goods, under customs supervision, before leaving the customs area Montenegro.
It foresees ways of supplying vessels with fuel, but also with other excise products such as alcohol and tobacco products directly from excise warehouses in ports and marinas without paying this duty.
"When it comes to supplying vessels with fuel and lubricants, this rulebook prescribes the way to supply vessels with this type of goods before leaving the territorial waters, after which the approval for free traffic, manifest, vignette or crew list is submitted. What is new compared to the previous solution is the possibility to supply vessels used for private purposes with fuel and lubricant under customs supervision and without paying import duties, before leaving the territorial waters. Vessels for private purposes are vessels that are used by their owners or on lease, for recreation, i.e. transportation of passengers and goods free of charge", the Ministry of Finance announced in response to the questions of "Vijesti" about the reintroduction of exemption from this duty.
Benefits are valid until entry into the EU
They state that the relief can be granted under the condition that vessels for private purposes must first be kept in the territorial waters of Montenegro for at least 72 hours, counting from the day following the day of entry into Montenegro. Vessels are obliged to leave the territorial waters of Montenegro after refueling, but can then return.
"This solution is in accordance with the government's policy, which is aimed at creating an additional incentive for the development of nautical tourism, that is, attracting a larger number of yachts, ships and high-paying tourists. According to the provision of Article 218 of the Customs Law ("Official Law of Montenegro 86/22"), this decision will be in force until Montenegro's accession to the European Union", stated "News" from the Ministry of Finance.
"Vijesti" previously asked the Customs Administration about the application of this rulebook, but this institution replied that "excise policy is led by the Ministry of Finance, and that authority is responsible for answering this question."
Damjanović introduced the excise tax due to solidarity
When Damjanović introduced an excise tax on fuel for these vessels in June 2022, it was announced that the budget lost 2018 million euros in a period of four years (from 2022 to 59) based on unpaid excise taxes and value added tax (VAT) on the circulation of fuel for yachts and ships, regardless of whether they carry out commercial activity or are used for recreation.
Of this total sum, as it was estimated at the time, around 40 million euros refers only to recreational yachts. Excluding excise duties, 103,9 million liters of fuel for yachts, ships and other vessels were sold in ports and marinas in this period, while unpaid duties for excise duties were 40,97 million euros, and 18,6 million for VAT.
At that time, the Ministry of Finance cited the need for solidarity with citizens and the economy, which pays the full amount of duties, as the reason for the introduction of excise taxes.
"It is a decision by which the richest stratum of the population stands in solidarity with ordinary citizens and the economy, bearing in mind that the budget has been losing part of its money for years due to excise taxes on fuel for yachts. I will also remind you that the European Commission (EC) has repeatedly requested that the regulations governing this issue be harmonized with EC regulations. Understanding the motives and arguments of people in the yachting industry, we expect their understanding of the overall situation in Montenegro, especially the fact that cheaper fuel compared to everything else cannot be the only motive for the arrival of yachts in Montenegro," said Damjanović at the time.
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Traffic did not drop after the excise tax
At the time, the Ministry said that EC reports repeatedly emphasized the need to harmonize customs regulations in this area with the EU acquis, which allows fuel to be supplied without paying excise duty, VAT and customs, only to vessels that transport passengers for a fee, that is, who perform commercial and industrial activities.
At that time, the non-arrival of yachts whose only motive for arriving was the supply of fuel, loss of income from moorings in ports paid for by yachts, lower profits of national oil companies and lower tax revenue based on profit tax were cited as risks for the abolition of this privilege.
In 2022, the Ministry said that the introduction of the excise tax will significantly improve the negotiating position of Montenegro in Chapter 18 - taxation and Chapter 29 - customs union, as well as reduce the shadow economy on the oil derivatives market.
Two weeks after the introduction of the excise tax, the Ministry stated that this measure did not lead to a reduction in fuel consumption in ports and marinas, but that in this period since its introduction, an increase in consumption was recorded up to seven times, which significantly contributed to filling the budget.
In 2022, Đukanović resented the return of excise taxes
In 2022, the former president of the country, Milo Đukanović, called on the Government to reconsider the decision on the introduction of excise taxes on fuel for yachts.
He said that supplying yachts with excise-free fuel was "our bait offered from the start" which made the offer in marinas attractive to megayacht owners compared to the "unchallenged competition in the Mediterranean".
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At that time, he had the same views as the current Government.
"During the past 15 years, we have invested a lot of effort to position Montenegro as a prestigious destination for nautical tourism. In extremely strong competition, we achieved excellent results, both in improving our tourist image, and in financial and economic terms," Đukanović said on Twitter at the time.
With the newest service that Montenegro is currently preparing, the overhaul of yachts at the location of the former shipyard in Bijela, Đukanović pointed out, "we are definitely rounding off a complete and high-quality offer" to owners and crews of yachts, as very important players in tourism consumption in every country.
"Therefore, solutions (introduction of excise tax on yacht fuel) that are inconsistent with the overall policy of the Government on this topic and that fundamentally threaten our comparative advantage are by no means welcome. My urgent warning: reconsider the decision on the collection of excise duties on yacht fuel. As our people would say: it will be a greater gift than a measure", the then president concluded a year and a half ago.
Data from the Ministry of Finance after the introduction of excise taxes showed that there was no decrease in fuel consumption in marinas and ports, but an increase in it, as well as no decrease in traffic in nautical tourism.
Duty-free and half a liter of alcohol and 40 cigarettes per day per passenger and crew member
The new rulebook provides that yachts, ships and other vessels can be supplied with other excise goods such as alcohol and tobacco products without paying excise duty from customs warehouses.
Thus, yacht and ship owners will be able to buy one liter of alcoholic beverages and 40 cigarettes or (two packs or in another appropriate quantity) per crew member and passenger per day for each day of stay and stay in the port and marina in Montenegro without excise duty.
As stated in the Ordinance, this will be conducted as a replenishment of the ship's supplies.
The rulebook prescribes the same measure for aircraft departing from Montenegro.
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