Reduction of VAT on hotel services in Montenegro

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Important regulation has recently been introduced in Montenegro, through the reduction of VAT on catering services in four-star hotels (in the north of the country) and five-star hotels (by the sea), which will be effective from from 2018. According to the media, Olivera Brajović, Director General of Tourism Development and Standards at the Ministry of Sustainable Development and Tourism, pointed out that these reduced tax rates on food and beverage preparation and serving services should increase the overall competitiveness of the hotel industry. sector, while contributing to the fight against the underground economy.

The reduction in question presents one of the amendments to the VAT law, which the government adopted at the end of July, and has been met with some skepticism among the general public who are of the opinion that such a change will benefit investors who are close to local authorities. Brajović, however, disputed these claims arguing that the main objective of this amendment is to increase the number of higher category hotels in Montenegro, as well as the budgetary revenues that will come from tourism VAT, taxes and contributions on salaries, and tax on the profits of companies with complementary activities.

In addition, according to her, such changes in the legislation are made in order to achieve the goals of the Tourism Development Strategy of Montenegro, which should be implemented by 2020. The main goal of the strategy is to transform the country into a top class tourist destination with a diversified offer throughout the year, thereby increasing employment nationwide, reducing poverty and enabling balanced development for years to come. In addition, regulatory changes such as the amendment in question are also introduced with the aim of bringing the country’s legislation in line with EU standards – a prerequisite for the country’s aspirations for EU membership.

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