The treaty applies to taxes on income and on capital. Taxes on income and property include all taxes imposed on total income, total property or on elements of income or of capital, including taxes on gains from the disposal of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. In Austria, these taxes include:
- tax on profits of legal persons;
- personal income tax;
- tax on land;
- the tax on agricultural and forestry enterprises; and
- tax on the value of buildable land.
While in Montenegro, the affected taxes include:
- tax on profits of legal persons; and
- personal income tax.
According to the DTA, the profits of an enterprise of a contracting state will be taxable only in that state unless the enterprise has a business activity in the other contracting state through a permanent establishment situated in that other contracting state. If the enterprise performs business activities in the other contracting state through a permanent establishment (PE), the profits of the enterprise may be taxed in that other state, but only in the amount which is attributable to that PE.
Profits from the operation of ships or aircraft in international traffic will be taxable only in the contracting state in which the place of effective management (POEM) of the enterprise is located.
The POEM of a maritime transport enterprise located onboard a ship is considered to be situated in the contracting state in which the home port of the ship is located or, if there is no such home harbour, in the state of which the maritime ship is resident.
Dividends paid by a company resident in one contracting state to a resident of the other contracting state may be taxed in that other state. The withholding tax (WHT) rates, according to the treaty, are set at 5% (for companies with at least 5% participation in the dividend-paying company) or 10% (all other cases for dividends), and 10% for interest. For royalties, the treaty differentiates between royalties for the use of literary, artistic or scientific copyright (for which the WHT is 5%) and those for the use of patent, trademark, design or formula (taxed with a 10% withholding tax).
The Montenegro-Austria DTA will be effective as of January 1 2016.