Through the measures of support to the economy for the first quarter, the Government of Montenegro envisages a special measure to encourage new employment in 2021, which is being implemented through a proposal for amendments to the law in the field of personal income tax and contributions to compulsory social insurance.
The main reasons for the implementation of this measure are contained in the necessity to, due to the negative consequences that the pandemic had on the economy, and consequently on the reduction of the number of employees, enable economic entities to re-employ part of the unemployed persons with significant benefits and incentives for employment.
Taking into account the demands of the economy to consider the possibility of probationary work for the application of this measure, the Ministry of Finance and Social Welfare, as the proposer of amendments to the mentioned laws and the Ministry of Economic Development, as the coordinator of economic support measures, give the following interpretation:
Beneficiaries of this measure may be those employers who establish an employment for an indefinite period of time with a person who has been on the records of ZZZCG for at least 3 months, with the possibility of previously hiring that person under a probationary contract lasting up to 3 months. The benefits defined by this measure will be calculated from the moment when the employer establishes an employment for an indefinite period of time (not during the probationary period).
Regarding the application of the mentioned laws, it is envisaged that they will be applied from January 1, 2021. Therefore, employers who hired people during 2021, and before the law has come into force, will be able to use these benefits.
We remind you that the measure is designed in such a way that the employer who establishes an employment relationship until 31.12.2021. indefinitely, in accordance with the Law governing the rights and obligations of employees on the basis of work, with a person residing in the territory of Montenegro and who is at the Employment Service of Montenegro for more than three months, is released from the obligation to pay income tax and contributions for pension and disability insurance at the expense of the employee and at the expense of the employer, for the salary paid for a period of three years from the day of employment. The only condition that the employer has to fulfill is that with the mentioned employment he increased the number of employees in comparison to the day December 31, 2020.
The employer will be released from the obligation to pay these taxes and contributions for wages, up to a maximum of the average gross wage in Montenegro in the previous year, in the following way:
- 90% of taxes and contributions – for salaries paid in 2021;
- 60% of taxes and contributions – for salaries paid in 2022;
- 30% of taxes and contributions – for salaries paid in 2023.
What should be emphasized is that the contributions for pension and disability insurance for persons for whom the right to exemption from payment of these contributions is exercised, will be paid from the budget of Montenegro.
More details regarding the implementation of measures are contained in the draft laws in question. The Revenue Administration and the Ministry of Finance and Social Welfare, after the adoption of the Law, will publish detailed instructions regarding the application for the use of this measure. In cooperation with the competent institutions, special attention will be paid to the effective application of control over these measures.
We remind you that the Ministry of Finance and Social Welfare has prepared Proposals for amendments to the Law on Personal Income Tax and the Law on Compulsory Social Insurance, which were determined at the session of the Government of Montenegro on February 4, 2021 and sent to the Parliament for adoption.
Source: Ministry of Economic Development