Tax evasion, hotels in Montenegro lower “

This step is a direct consequence of the authorities' decision since the beginning of this year to double the VAT rate for hotel services from 7 per cent to 15 per cent.

“simply switched to private accommodation and did not renew permission as a hotel. The goal was not to avoid obligations to the state, but because the loads are bigger for hotels than for private accommodation”, Montenegro's Association of Hotels Chairman Nikola Pejovic told Radio Free Europe.

The decision to raise the VAT rate was adopted in September last year by the parliamentary majority consisting of the “Europe Movement now 40x1> of Prime Minister Milloko Spajic and former Democratic Front of Parliament Speaker Andrija Ma persecuted.

According to Eurostat data, the VAT rate for hotel services in European Union countries ranges from 5 to 14 percent.

The tax increase took place despite expert warnings that this would negatively affect tourism the sector, which accounts for about 30 per cent of Montenegro's gross domestic output.

In a Government document by the end of July, it is noted that “hotels are often recategorised into smaller units to avoid higher taxes and the competencies of the Ministry of Tourism”.

The ministry did not answer the REL's question on the matter.

Do they have the right to do so?

No one from the host owners has done anything against the law. They have this right”, explain about RELA financial analyst Ana Nevees Radovic.

It explains that the tourist accommodation category is determined by the number of stars showing the quality of service by a star for cheaper offers, up to five stars for luxury hotels. Change of category, according to her, does not necessarily mean lowering quality.

“Summerca has maintained the same level of service, only that they are formally classified to a lower level”, Radovovic says, but warns it could damage market balance and competition in the long term.

How They Avoid Taxation in Other Ways

Pejovic has said earlier that hotel owners with up to 80 beds could switch to private accommodation status by formally sharing beds among family members not to enter the VAT system.

So four of us separate from 20 beds each, become 80 beds, circulate 120 thousand euros and practically give nothing to the state”, he said.

Under current regulations, annual turnover providers of up to 30,000 euros are not obliged to pay T V A category involving most private accommodation, tourist villages, some goads, and pants.

This is not the only problem facing Montenegrin tourism.

Tens of millions of euros lost from accommodation “in black” in Montenegro

Montenegro has lost about 86m euros only from unregistered private accommodation, according to data from March 2025.

To illustrate the sum, authorities say two clinics within Montenegro's Clinical Centre were built for a fifth of that amount last year.

The chairman of the Association of Hotels of Montenegro, Nikola Pejovic, warns that unregistered accommodation is a major problem, as there are many more such units in the market than hotels.

“It is impossible to track their exact number. There are thousands of units across the country. They're in the grey zone and nobody controls them, nor does anyone have mechanisms for this”, he says.

That the problem lies in control, financial analyst Ana Nevees Radovic agrees. According to her, data from platforms such as Booking and Airbnb clearly shows there is a serious problem with monitoring unregistered accommodation.

Radovic says that Montenegrin authorities have attempted to co-operate with these platforms to prevent registration that is not reported to the state, but that efforts have not yielded results.

“The process starts, then there are excuses why it did not succeed and quit... Lack of results shows institutional weaknesses”, she adds.

In addition to lack of registration, many owners do not present guests and pay the residence tax, which is usually one euro per day. Radovic stresses that control is weak and inadequate penal policies:

If you can offer unregistered accommodation for years without any consequences, then you are unlikely to go into legitimate business without any legal obligation.

Tourism revenue decreases for the first time since independence

According to the Central Bank of Montenegro, tourism revenues last year stood at 1.66 billion euros a 3.6 per cent drop compared to 2023.

Montenegro's Chamber of Commerce stressed that this is the first time since its 2006 declaration of independence ) ruled out in the pandemic year since tourism revenues fall compared to the previous year.

According to her, this shows that tourism is suffering the consequences of wrong decisions in creating tourist supply and lack of a plan and long-term development vision.

The State Statistics Agency (MONSTAT) data shows that the number of nights of stay on all types of accommodation during this year's January-June period is lower by 272 thousand compared to the previous year by marking decline for the second consecutive year. / REL/ Periscopi/