Luxembourg’s Council of State approved the draft law for the ratification of the income and capital tax treaty with Montenegro on 24 September 2024.
The treaty, signed on 29 January 2024 in Luxembourg, establishes tax rates for dividends, interest, and royalties between the two countries. Luxembourg employs a mix of credit and exemption methods to avoid double taxation, whereas Montenegro uses the credit method.
Dividends are taxed at a maximum of 5% for companies owning at least 10% of the payer’s capital, while a 10% rate applies otherwise. Interest is generally taxed at 10%, but is exempt if owned by the government, central bank, or wholly-owned financial institutions of the other state.
Royalties are subject to a 5% withholding rate for copyright use and a 10% withholding rate for patents and trademarks.
This is the first tax treaty between the two nations. It will take effect upon the exchange of ratification instruments, with its provisions applying from 1 January of the year after it comes into force.
