Citizens of Montenegro, as well as foreigners who have a residence permit, will have to declare assets and income they generate from cryptocurrencies as well as from digital platforms through which they generate income from renting out real estate and other services (Booking, Airbnb,...). Operators of these digital platforms and providers of cryptocurrency services (or their representatives) will have to be registered in Montenegro, have a database of clients who are taxpayers from Montenegro and submit them to the tax authorities, but they will have this part of the obligation only after Montenegro joins the European Union.
These are the most significant innovations in the draft amendments to the Tax Administration Law, which are up for public debate until November 19th.
The proposed amendments provide the opportunity for the tax authorities of Montenegro and the competent authority of an EU Member State to provide mutual assistance in the collection of tax claims from a tax debtor who has a residence or property in their country, as well as the possibility for the tax authority of Montenegro and the competent authority of another EU Member State, based on a mutual agreement, to carry out comparative or joint supervision of one or more natural or legal persons in order to obtain information that is of common or complementary interest to both countries.
Automatic exchange of information with the EU
The goals of the amendments to the law are to improve tax administration, reduce opportunities for tax evasion and avoidance, harmonize domestic legislation with EU directives, and improve international cooperation.
By implementing the proposed solutions from the draft law, as stated, the prerequisites will be created for the start of the automatic exchange of information on users of digital platforms and services related to crypto assets.
"The main cause of lower tax collection is the increasing mobility of persons, capital, products and services, which has increased the possibility of tax avoidance and tax evasion, which has led to the need to intensify activities at the international level in order to create new rules in the field of international taxation and administrative cooperation in tax matters. Montenegro is very committed to tax transparency and strengthening the fight against tax evasion and preventing tax avoidance. As a member of the Global Forum on Tax Transparency and Automatic Exchange of Information for Tax Purposes, together with other member countries, it will continuously work on combating tax evasion by implementing two internationally agreed standards for the exchange of information for tax purposes - exchange of information on request (EOIR) and automatic exchange of financial account information (AEOI)," the explanatory memorandum to the draft law states.
Online publishers have not been registered so far
They point out that the current regulations applied by Montenegro only prescribe the international exchange of information on accounts owned or controlled by a resident of an EU member state or another state, on transactions from those accounts and the income earned by the aforementioned persons, as well as on the income earned by residents of Montenegro who are members of an international group of related persons and who carry out activities in another state.
"The implementation of the proposed solutions from the draft, namely the identification of service providers and users of digital platforms, as well as services related to crypto-assets and their introduction into the taxation system, through the obligation to submit reports to the tax authority by these persons and the expansion of the authority of the tax authority to supervise the reporting obligation by these persons, will enable a broader coverage of persons who sell products or provide a certain type of service and persons who use these services, who have not been registered as taxpayers, i.e. have not paid taxes to the state. Also, the proposed amendments prescribe the imposition of misdemeanor penalties for persons who do not comply with the provisions of this law in the part relating to the collection of data and submission of reports for the purpose of information exchange," the explanatory memorandum to the draft states.
As they said, the proposed solutions will have a positive impact on the State, as service providers and users of digital platforms and services related to crypto assets will be introduced into the taxation system, which will contribute to reducing the shadow economy and increasing budget revenues and strengthening competitiveness in the market.
The proposed norms give new powers to municipal revenue administration officials to, when determining the actual factual situation of real estate that is subject to taxation, inspect that real estate in order to properly determine the tax liability.
The amendments elaborate on the institute of a tax representative in more detail, so that the tax administration can engage him at the taxpayer's expense for the purpose of settling the tax liability, especially if the taxpayer is unknown or the person has died and the probate procedure has not been carried out.
The state will monitor all payments for renting apartments online
Companies that operate digital platforms for renting real estate, offering accommodation, transportation and other services are defined in the draft law as reporting platform operators, and will have to register in Montenegro by the time of accession unless they are already registered in an EU member state.
He will be obliged to collect data and keep records on platform users, i.e. those who order advertisements, on the total fees paid and the number of relevant activities in relation to which that fee was charged, on taxes, fees or commissions that he has suspended or charged to platform users.
These norms, as stated, are in line with EU directives and are already being implemented in member states. The aim of these norms is to provide tax authorities with insight into cash flows in order to prevent money laundering and fully collect taxes.
The platform operator will have to provide accurate data and keep all data from the platform on the services provided for at least five years.
All crypto asset trades will be registered and taxed
A reporting provider of crypto-asset-related services will have to register with the Securities Commission until Montenegro joins the EU, if it is not already registered in another Member State. All crypto-asset trades will be in a common EU registry.
It will also be required to collect data and keep records on crypto-asset users who are natural or legal persons, as well as on services provided to crypto-asset users, activities undertaken, orders and transactions carried out and income generated from the sale or acquisition of crypto-assets for each type of crypto-asset on which due diligence measures are being taken, based on the EU Common Reporting Standard.
The main part of the draft law is scheduled to enter into force on the day following its publication in the Official Gazette. The part of the law that will enter into force then also includes a section where crypto-asset owners must report assets generated through crypto-asset transactions to the Tax Administration.
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