How is real estate transfer tax calculated?

It is important to know the value range your property falls into so you can properly plan your budget.

Buying an apartment or house is one of the biggest steps in life, but are you prepared for all the costs that come with it? One of them is the real estate transfer tax, which often surprises those who are not familiar with the details. In this text, we will explain how the tax is calculated, who pays it, when you can be exempt, and what you need to know before signing the contract.

What is the real estate transfer tax and how is it calculated?
Real estate transfer refers to any acquisition of ownership rights – whether by purchase, exchange, inheritance, gift, or other methods. The tax base for the real estate transfer tax is the market value of the property at the time of acquisition – in other words, the price that is achieved or could be achieved on the market at the time of acquisition.

As of January 1st, 2024, the real estate transfer tax in Montenegro is progressive, and is calculated as follows:

• Up to €150,000 the tax is 3% of the purchase value

• From €150,000.01 to €500,000 the tax is €4,500 + 5% on the amount over €150,000

• Over €500,000 the tax is €22,000 + 6% on the amount over €500,000

That’s why it’s important to know which value range your property belongs to so you can properly plan your budget.

Who pays the tax?
In most cases, the buyer is obliged to pay the tax, unless otherwise agreed. This cost is not automatically included in the price of the property, so it should be calculated in advance.

When is the tax not paid?
There are situations in which you are exempt from this tax:

• Purchasing directly from the developer (new construction): in this case, VAT is paid instead of the tax, usually 21%, and is generally included in the price.

• First-time housing purchase: if you are an adult Montenegrin citizen who is acquiring a property for housing for the first time, for an area of up to 20 m² per household member, and do not own any other property – you may be exempt from paying the tax.

What does the procedure look like?
After signing the contract with the notary, you are obliged to submit a tax application to the competent Tax Administration within 15 days.
The Tax Administration estimates the market value and issues a decision.
The tax must be paid within 15 days from the receipt of the decision.
The tax is paid into the municipal account where the property is located.
After payment, you can submit a request for registration of ownership in the real estate cadastre.

What if you are late?
If you do not pay on time, the Tax Administration will calculate default interest and may initiate enforced collection. That’s why it’s important to carefully track deadlines and keep all documentation.

Additional tips:

• Request a preliminary estimate from the Tax Administration if you want to know the approximate amount before signing the contract.

• Keep proof of payment – it’s required for property registration.

• Consult a notary, lawyer, or agent – they can help everything go smoothly.

Real estate transfer tax is not complicated, but it requires attention and planning. Knowledge can save you money and avoid stress.

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