Milatović returned amendments to the Real Estate Tax Law to the Parliament

President of Montenegro Jakov Milatović returned to the Parliament for further development and re-decision-making the Law on Amendments to the Law on Real Estate Tax, which was adopted at the session on July 30.

The explanation of the decision states that certain provisions of that law, especially Article 12, paragraph 3, are in conflict with the Constitution of Montenegro, the Law on Tax Administration and the Law on Protection of Competition.

"The proposed amendments allow local government units to independently determine the amount of tax relief for agricultural producers, which leads to a violation of the principle of constitutional equality and the creation of an unequal position between producers from different municipalities. For example, if in the municipality of Berane, the local government were to introduce a tax relief of 90%, and in Tivat only 20%, it would clearly create inequality for farmers, solely based on place of residence.

"The explanation specifically points to Article 142, paragraph 3 of the Constitution of Montenegro, which stipulates that issues of taxes and tax reliefs cannot be transferred to the exclusive jurisdiction of local governments. This, it is stated, violates the principle of a single economic space, as well as the constitutional guarantee of a free market and competition from Articles 139 and 140 of the Constitution. These constitutional rules guarantee that the economic environment and tax rules must not differ from municipality to municipality, as this would lead to direct discrimination of citizens and agricultural producers based on their place of residence.

"The current law prescribes a mandatory tax rate reduction of 70% for all registered agricultural producers. This ensures equal treatment throughout the territory of Montenegro.

"The retroactive effect of this law through the introduction of a new Article 28b is clearly unconstitutional, which is in direct contradiction to Article 113 of the Tax Administration Act, which stipulates that tax regulations may have retroactive effect only in exceptional cases of public interest, which does not exist in this case. For example, if the law were to enter into force in August 2025, but apply to the entire calendar year, farmers could be obliged to pay additional taxes retroactively, even though they have already settled their obligations under the applicable law. Such a solution is legally untenable and further violates the principle of legal certainty.

"Another reason for returning the law for revision is that the adoption of such amendments could have negative consequences for around 22.000 registered agricultural producers, who would be left without guaranteed tax benefits. For example, a farmer from Danilovgrad, who has so far paid tax reduced by 70%, could, according to the decision of the local government, pay tax with only a 20% reduction, which would make his annual tax liability 3,5 times higher than before.

"In the event that the Constitutional Court of Montenegro subsequently declares the law unconstitutional, local self-government units would be obliged to return the excess tax collected, or to subsequently collect the tax in the event that the local relief was contrary to the Constitution.

For example, if the municipality of Nikšić increases taxes for farmers based on new authorizations and the law is later repealed, the local government will have to refund the overpaid amount to all taxpayers, including statutory interest. Conversely, if the municipality of Bar decides to reduce taxes by 90% and the law is subsequently repealed, citizens would have to retroactively pay the uncollected tax, meaning that people who were counting on a tax break would have to pay the difference all at once, along with interest, which would be a serious financial blow for many households.

"Such legal uncertainty would further undermine citizens' trust in the tax system and fiscal policy of the state, and call into question the responsible management of public funds.

"With the decision to return the Law on Amendments to the Law on Real Estate Tax for further revision, President Milatović continues the fight for Montenegro in which the tax system does not adapt to political will, but rather protects the public interest, the safety of citizens and the stability of local budgets. In a time when every euro is important to every producer, the state must guarantee predictability, and not experiment with citizens' rights," the statement reads.