Accommodation providers with an annual income of less than 30 thousand euros will still not be liable to pay value added tax (VAT), but it will be charged on part of the price of the mediation service charged by the internet platforms through which the accommodation is rented. Domestic and foreign internet platforms that mediate in the rental of accommodation will have to keep records of all transactions and submit them to the Montenegrin tax authorities so that they can check whether VAT has been correctly calculated and whether the accommodation provider has exceeded the income threshold of 30.000 euros.
These are some of the novelties from the draft VAT Law prepared by the Ministry of Finance, headed by Novica Vuković, put it up for public debate. The proposed text of the law, as stated, fully implements European directives and rules on the calculation of this tax, which Montenegro is obliged to adopt before accession and to apply them upon accession.
The tax rates of zero, seven, 15 and 21 percent on goods and services remain the same.
New accounting methods and controls
A large number of new provisions relate to various transactions for the provision of services and the sale of goods where service providers and buyers are located in Montenegro and various EU member states and other countries, as well as for transactions and turnover that occur in the internet space. The largest part of the articles of the law relates to the calculation of VAT, control of calculation and collection, to transactions related to real estate, transport, passenger transport, mediation and similar services between taxpayers and buyers in different countries.
On the day of accession, the tax administration will have an information system connected to the systems of other members, which will lead to better exchange of information, easier monitoring of transactions, turnover and determination of tax liabilities. This data will be able to be used for determining other tax liabilities that do not only relate to VAT.
Thus, the Tax Administration will be able to use the data on turnover from accommodation rentals that the Tax Administration receives from internet platforms (booking, airbrn...) to control income tax returns that accommodation providers need to file.
Most accommodation in the grey zone, losses in the tens of millions
This possibility was announced in the Program for Combating the Informal Economy 2024-2026, which was adopted at the end of 2023.
"For many years, the tourism sector has been characterized by the existence of a large number of entities that rent out accommodation capacities, but do not report them to the competent institutions. This further means non-payment of fiscal duties, since failure to report tourists and their registration in the Central Tourist Register means non-payment of the tourist tax, which represents the income of local governments and the Tourist Organization of Montenegro, personal income tax, as well as the corresponding surtax on personal income tax. In this way, the state budget and the budgets of local self-government units, according to the Government's estimate, are deprived of tens of millions of euros during the year. This also constitutes a criminal offense of tax and contribution evasion," the program states.
It was then pointed out that the problem of the gray zone in the rental of accommodation is further complicated by the global influence of internet platforms for mediating in the rental of accommodation capacities.
"They consist of foreign (Booking, Airbnb, etc.) and domestic platforms (e.g. apartment for the day, etc.), which have become one of the main mechanisms through which tourists reserve and pay for accommodation in Montenegro. Domestic accommodation providers that are not registered to perform this activity in accordance with applicable regulations are increasingly advertising through the aforementioned international internet platforms. According to Government data, the number of providers advertising their services through internet platforms is much higher than the number of registered accommodation providers in the Central Tourist Register," this document from 2023 states.
Place of taxation is the country in which the property is located.
The draft VAT law now states that the place of performance of transactions related to real estate (sale, rental, etc.) is considered to be the country where the real estate is located, and not the place where the person renting the real estate is from or the headquarters of the internet platform through which the accommodation is rented.
So, these intermediary internet platforms also become taxpayers and will have to submit data on transactions for renting accommodation in Montenegro to the tax authorities in Montenegro, regardless of where the tenant is from. This also applies to intermediary platforms through which tickets are purchased for transport that is fully or partially carried out on the territory of Montenegro.
"Where a taxable person, using an electronic interface such as a point of sale, platform, portal or similar means, facilitates the supply, within the Union, of short-term rental of accommodation or road passenger transport services, and that taxable person is not deemed to have received and supplied those services himself, the taxable person facilitating the supply shall be required to keep records of those supplies. Those records must be sufficiently detailed to enable the tax authorities of the Member States in which those supplies are taxable to verify whether VAT has been correctly calculated," the draft law states.
This means that taxpayers who enable the delivery of services (intermediation in the provision of accommodation) - internet platforms and applications - are required to keep detailed records of these transactions.
“The records must be made available to Member States in electronic form and must be kept for ten years from the end of the year in which the transaction took place,” the next paragraph of the draft law states.
Accommodation publishers analyze draft newspapers
When asked by "Vijesti" to comment on the draft VAT law, the Association of Accommodation Providers said that the majority of providers will still not be part of the mandatory VAT system, that is, they will not exceed the annual revenue limit of 30 thousand euros, and that consultations are underway regarding other novelties from the draft that relate to them.
"Given the size of the capacity and the duration of the season, the vast majority of publishers do not enter the VAT system. However, we are monitoring the topic, arranging consultations with colleagues, but at this moment I cannot give you our position and comments until we reach an agreement," the association said.
Discussion until June 2nd, no RIA or forum
The Ministry of Finance, as the proponent of the draft, stated that the public debate will last 20 days from the date of publication, i.e. until June 2nd.
According to the public discussion program, comments and suggestions can be submitted by post or email. There is no provision for organizing a central public discussion - a round table or a public forum.
The ministry did not publish a regulatory impact analysis (RIA) with the draft law, although this is customary. The explanatory memorandum did not state how these changes could affect future state revenues. It only indicated that the potential cost of harmonizing tax authorities' information systems with those of EU members could amount to up to 1,3 million euros.
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