Montenegro Tourism Faces Decline As Hotels Downgrade To Escape Vat Burden

Published on August 17, 2025

Castle connected Island connected nan reservoir successful Montenegro

The tourism assemblage of Montenegro conscionable deed a unsmooth spot acknowledgment to a caller taxation rule. Starting January 2025, nan VAT connected edifice stays is jumping from 7 per cent to 15 per cent. Parliament passed nan hike successful precocious 2024, ignoring large alarms from economists who predicted superior fallout for nan industry. Because tourism makes up astir 30 per cent of nan nation’s GDP, this move is thing but small. The hike threatens to raise prices, slow caller bookings, and shingle nan assurance that nan country’s beaches and mountains person built up complete years.

In a batch of European Union countries, VAT connected edifice stays usually runs from 5% to 14%, based connected Eurostat data. Montenegro’s caller hike now places its VAT connected lodging higher than galore adjacent countries, which could make it little charismatic to visitors compared to its rivals.

Hotels Shift to Private Accommodation

As a nonstop consequence of this higher tax, astir 20 hotels crossed Montenegro decided not to renew their edifice licences. Instead, they re-categorised themselves arsenic backstage accommodation units. This measurement allowed them to proceed operating while avoiding nan heavier obligations that travel pinch edifice classification.

The process was ineligible and straightforward. By changing their charismatic category, nan owners escaped nan higher VAT level while maintaining astir nan aforesaid level of service. Private accommodation, nether Montenegrin law, enjoys much favourable taxation curen and, successful galore cases, is not required to salary VAT astatine each if turnover remains beneath 30,000 euros annually.

Legal Loopholes and Creative Arrangements

Many mini edifice owners recovered imaginative ways to usage nan strategy to their advantage. For example, a spot pinch 80 beds could beryllium divided connected insubstantial among 4 family members. Each personification would past run 20 beds separately, keeping their yearly turnover beneath nan VAT threshold. In this way, what was efficaciously a mini edifice continued to operate, but it was officially listed arsenic respective backstage households.

This statement allowed hundreds of thousands of euros successful gross to move extracurricular nan VAT system, creating a important nonaccomplishment for authorities finances.

Unregistered Accommodation Adds to nan Problem

The re-categorisation rumor has only highlighted a larger and older problem successful Montenegro’s tourism market: unregistered accommodation. According to charismatic estimates, Montenegro mislaid astir 86 cardinal euros successful 2025 unsocial owed to unregistered backstage rentals. These units often look connected celebrated booking platforms specified arsenic Airbnb and Booking.com but are ne'er reported to nan authorities.

The number of specified units is chartless but believed to beryllium successful nan thousands. Monitoring and power stay weak. Attempts by nan authorities to cooperate pinch world booking platforms person not brought results. Efforts were started, but reasons were later fixed for why nan process could not continue, and initiatives were dropped.

Guest Registration and Occupancy Taxes Ignored

In summation to taxation losses, nan strategy of impermanent registration is besides being bypassed. Accommodation providers are expected to registry each impermanent and salary a regular occupancy tax, usually 1 euro per night. However, galore unregistered properties do not travel this rule, further reducing authorities and section revenues.

Punitive measures stay inadequate. Owners who proceed to supply unregistered accommodation seldom look consequences. As agelong arsenic this remains nan case, location is small information for them to subordinate nan general market.

Tourism Revenues Begin to Decline

The financial effect is becoming visible. In 2024, Montenegro’s full tourism revenues reached 1.46 cardinal euros, which marked a 3.6 per cent diminution compared to 2023. According to nan Central Bank of Montenegro, this was nan first autumn successful tourism revenues since independency successful 2006, isolated from nan pandemic year.

Data from nan nationalist statistic agency MONSTAT showed a akin inclination successful visitant stays. Between January and June 2025, nan number of overnight stays dropped by 272,000 compared to nan aforesaid play nan erstwhile year. This marked nan 2nd consecutive twelvemonth of decline.

Figures from early 2025 further confirmed nan downturn. In nan first 5 months of nan year, revenues from overseas visitors dropped by complete six per cent compared to nan erstwhile year. These numbers propose that Montenegro is opening to suffer its entreaty arsenic a tourer destination nether nan weight of mediocre readying and regulatory weaknesses.

Warnings for nan Future

The diminution has raised concerns astatine aggregate levels. Tourism manufacture leaders fearfulness that continued downgrading of hotels and nan dispersed of unregistered accommodation will harm title and disrupt marketplace balance. Even if nan value of work remains similar, nan unequal distribution of taxation burdens places registered hotels astatine a disadvantage.

Analysts reason that Montenegro’s authorities must urgently fortify power mechanisms and creation semipermanent strategies for nan tourism sector. Without reforms, nan state could spot reduced revenues, weaker world competitiveness, and an erosion of spot among investors and visitors alike.

Conclusion

Right now, Montenegro’s recreation manufacture is up against a immense problem—maybe nan biggest since nan state became independent. A large hike successful nan VAT complaint connected edifice services is pushing galore hotels to little their prima ratings connected paper. At nan aforesaid time, much and much group are renting retired rooms aliases apartments without bothering to register, truthful nan maturation is chaotic and unmonitored. This one-two punch is shrinking nan taxation money nan authorities collects and making it reliable connected nan honorable businesses that are trying to travel nan rules.

While nan day-to-day acquisition for visitors still feels good, clear risks are building up. Without beardown argumentation changes now, Montenegro’s tourism image could weaken, putting astatine consequence nan economical lifeline of a federation that depends truthful overmuch connected this sector.

[Image Source: Visit Montenegro Official Website]