On December 10 2018, Portugal published Notice 144/2018 in
the Official Gazette, announcing the new income tax treaty with
Montenegro.
The treaty covers corporate profit tax and personal income
tax (PIT) in Montenegro, as well as Portuguese PIT, corporate
income tax (CIT) and surtaxes on CIT. The treaty applies from
January 1 2019 and follows the general OECD model.
The treaty introduced the following principles and
rates.
Withholding tax rate changes
- Dividends: 5% of the gross amount of the
dividend will apply if the beneficial owner (BO) is a company
which holds at least 5% of the capital of the company paying
the dividends (directly or indirectly). In other cases, a
withholding tax (WHT) of 10% will apply to all other
dividends;
- Interest: A 10% WHT will apply to the
gross amount of the interest; and
- Royalties: A 5% WHT will apply for the use
of (or the right to use) any copyright of literary, artistic,
or scientific work, including cinematographic films and
recordings on tape, or other media used for radio or
television broadcasting, or other means of reproduction or
transmission or computer software. Otherwise, a 10% WHT will
apply to the gross amount of the royalties for the use of, or
the right to use, any patent, trademark, design or model,
plan, secret formula, or process, or for information
concerning industrial, commercial, or scientific
experience.
Capital gain changes
One of the two states may tax capital gains derived by a
resident of the other state in the following scenarios:
- Gains acquired from the alienation of
immovable property situated in another state;
- Gains from the alienation of movable
property forming part of the business property of a permanent
establishment (PE), which a company of one state has in the
other state; and
- Gains derived by a resident of one state
from the alienation of shares deriving more than 50% of their
value, directly or indirectly, from immovable property
situated in the other state.
Furthermore, gains from the alienation of ships or aircraft
operated in international traffic will be taxable only in the
country in which the place of effective management of the
company is located. When it comes to the gains acquired from
the alienation of other properties than to which have been
referred, such gains shall be taxable only in the state where
the alienator is a resident.
The treaty was concluded in English, Portuguese and in
Montenegrin. In the case of any divergence of interpretation,
the English text prevails.
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| Bojana Minic |
Bojana Minic (bojana.minic@eurofast.eu)
Eurofast Global – Montenegro
Tel: +382 20 228 490
Website: www.eurofast.eu