Montenegro’s Ministry of Finance has issued the 2026 deemed arm’s length interest rate under its transfer pricing rules for related party financial instruments.
Montenegro has set the deemed arm’s length interest rate for 2026 at 4.97% after the Ministry of Finance adopted a Rulebook regulating interest rates on financial instruments between related parties. The Rulebook was published in the Official Gazette of Montenegro No. 145 on 11 December 2025, entered into force eight days later, and applied from 1 January 2026.
Under the country’s transfer pricing rules and Article 38b of the Corporate Income Tax Law, taxpayers may use the prescribed deemed rate as the arm’s length rate for related party loans. Alternatively, they may determine an arm’s length rate or range by applying approved transfer pricing methods, supported by appropriate documentation.
Interest exceeding the arm’s length rate, whether based on the deemed rate or other methods, is generally not deductible for tax purposes. The framework aligns with OECD principles, allowing flexibility in determining compliant pricing for related party financing arrangements.
Businesses are expected to review whether the 2026 rate aligns with interest applied or planned in related party financial instruments. Companies with significant or long-term related party financing may consider applying OECD-based methods to assess the arm’s length rate, which could provide greater certainty in future tax treatment.
