Montenegro Proposes Amendments to the VAT Law

Montenegro's Parliament has received a proposal to amend the Law on Value Added Tax (VAT), introducing significant changes to the taxation of motor fuels, essential food products, medicines and medical devices.

The proposal, submitted on 10 November 2026 by members of the Civic Movement URA parliamentary group, seeks to reduce the tax burden on essential goods and address increasing living costs.

The proposed amendments concern Articles 24a and 25 of the VAT Law, which regulate reduced and zero VAT rates.

If adopted, the measures could affect supermarkets, grocery stores, petrol stations, pharmacies, medical equipment retailers and businesses operating POS and electronic fiscalization systems.

The amendments are currently proposals and do not change the VAT rates applicable to retail transactions. The existing legal requirements remain applicable until a new law is adopted and enters into force.

One of the main changes concerns the taxation of motor fuels.

The proposal would amend Article 24a(1)(1) to introduce a reduced VAT rate of 7% for unleaded petrol and gas oils used as motor fuel.

These fuels are generally subject to Montenegro's standard VAT rate of 21% under the existing taxation framework.

The proposed reduction is intended to lower fuel costs for consumers and businesses. According to the explanatory memorandum, fuel prices affect transportation, production, distribution and service costs, meaning that lower taxation could also influence prices across other economic sectors.

For petrol station operators, implementation would require adjustments to VAT classifications, fuel pricing configurations and fiscal receipt calculations.

However, the proposal does not introduce new technical specifications for fuel dispensers, POS terminals or fiscalization software.

The proposed amendments would also expand the application of the 0% VAT rate to a broader range of essential food products.

Under the existing VAT framework, certain basic food products already benefit from zero-rate treatment, while others are covered by the reduced 7% rate.

The proposal would revise Article 25(1)(12d) to establish zero-rate treatment for the import and supply of the following products:

• Bread
• Flour
• Oil
• Milk and dairy products
• Infant food
• Fat
• Meat
• Eggs
• Sugar
• Salt

Importantly, the proposal would consolidate and expand zero-rate treatment rather than introduce it for every listed product for the first time. Bread, flour and sunflower oil already appear among the zero-rated products in the existing provisions reproduced in the legislative documentation.

The broader scope could significantly affect grocery retailers and supermarket chains handling large numbers of products across different VAT categories.

Retailers would need to identify affected items and adjust their product databases and VAT mappings accordingly.

The explanatory memorandum states that the objective is to reduce the tax burden on basic food products and create conditions for lower retail prices, particularly for households with limited incomes.

Nevertheless, the actual effect on consumer prices would depend on how businesses adjust their pricing.

Another important amendment concerns medicines and medical devices.

Currently, the zero VAT rate applies to medicines and medical devices included on the relevant lists associated with Montenegro's Health Insurance Fund.

Other medicines may fall under the reduced 7% rate, depending on their classification.

The proposal would amend Article 25(1)(9) to apply the 0% VAT rate to medicines and medical devices without restricting eligibility to the existing Health Insurance Fund lists.

The explanatory memorandum specifically highlights the extension of zero-rate treatment to medicines purchased by individuals at their own expense.

The change could affect pharmacies, pharmaceutical distributors, medical equipment suppliers and healthcare-related retail businesses.

If adopted, businesses would need to review product classifications and update VAT settings for products newly qualifying for the zero rate.

Further implementing guidance may be necessary to clarify the exact classification of eligible medical products.

The proposal also introduces a distinction between medicines intended for human use and veterinary medicines.

Under the amended Article 24a(1)(2), veterinary medicines would remain subject to the reduced 7% VAT rate.

Medicines and medical devices covered by the amended Article 25 would instead qualify for zero-rate treatment.

This distinction would be important for veterinary pharmacies, agricultural suppliers and retailers selling both human and veterinary medical products.

Businesses would need to maintain separate VAT classifications where different tax treatments apply.

The proposal establishes two implementation requirements.

• First, the law would enter into force on the eighth day following its publication in the Official Gazette of Montenegro, provided it is adopted.
• Second, the government authority responsible for finance would have 30 days from the law's entry into force to harmonize the secondary regulations governing reduced and zero VAT rates.

This means the proposal does not establish a fixed calendar date for implementation.

The precise timeline will depend on parliamentary adoption and subsequent official publication.

The proposed changes would also require administrative adjustments to ensure that the applicable VAT rates and qualifying product categories are consistently defined.

Although the proposed amendments primarily concern VAT rates, they would also have practical consequences for retailers and fiscalization solution providers.

Montenegro operates an electronic fiscalization framework in which retail transactions must be processed and reported according to applicable fiscal requirements.

Changes to VAT rates can therefore affect several elements of retail operations, including product tax configuration, VAT calculations, receipt generation, transaction records and reporting.

Retailers operating multiple stores or centralized product databases would need to coordinate tax configuration changes across their systems.

Fiscalization software providers may also need to verify that the new tax classifications are correctly reflected in electronically fiscalized transactions.

Montenegro has previously introduced adjustments to its electronic fiscalization infrastructure in response to VAT legislation changes, demonstrating the operational connection between tax rates and fiscal reporting.

However, the current proposal does not explicitly introduce new fiscal receipt formats, electronic reporting procedures or technical certification requirements.

Any additional technical instructions would need to be confirmed through official guidance or implementing regulations.

The explanatory memorandum recognizes that reducing VAT rates would affect government revenue.

It states that the financial consequences should be assessed using historical sales data and existing tax rates for the affected products.

However, the proposal does not provide a quantified estimate of the expected revenue reduction.

The main legislative objective is to make essential goods more affordable while reducing the financial pressure on households.

For businesses, the most immediate consideration would be ensuring that any future VAT changes are implemented correctly and consistently across all sales channels.

Until the proposal is adopted, retailers should continue applying the existing VAT legislation.

How will the proposed VAT changes impact retailers and fiscalization systems in Montenegro?

If adopted, retailers would need to update VAT classifications, POS systems, product databases and fiscal receipt calculations to reflect the new 7% and 0% rates. Businesses should monitor parliamentary approval and implementing regulations, coordinate updates with their fiscalization providers and test affected transactions before the new rates become applicable.

Here you can find the draft law - Source

Ljubica Blagojević Junior Legal Research Specialist Linkedin profile