An important piece of regulation has been introduced in Montenegro recently, through the reduction of VAT on catering services in four stars hotels (in the north of the country) and five-star hotels (on the seaside), which will be effective from 2018. According to media reports, Olivera Brajović, General Director of Tourism Development and Standards in the Ministry of Sustainable Development and Tourism, pointed out that these reduced tax rates on services of preparing and serving food and drinks are expected to raise the overall competitiveness in the hospitality sector, while at the same time contribute to the combat against grey economy.
The reduction in question presents one of the amendments to the Law on VAT, which the government adopted in late July, and was met with a certain amount of scepticism among the general public who are of the opinion that such a change will benefit those investors who are close to the local authorities. Brajović, however, disputed these claims by arguing that the greatest objective of this amendment is to increase the number of higher category hotels in Montengro, as well as budget revenues which will derive from the VAT on tourism, taxes and contributions on salaries, and the tax on the profits of those companies with complementary activities.
Furthermore, according to her, such changes in the legislation are being made for the purpose of fulfilling the objectives of the Tourism Development Strategy of Montenegro, which is expected to be implemented by 2020. The strategy's main goal is to turn the country into a top class tourist destination with a diversified year-round offer, in turn increasing nation-wide employment, reducing poverty, and enabling a balanced development for years to come. In addition, regulation changes such as the amendment in question are also being introduced for the purpose of harmonising the country's legislation with EU standards – a prerequisite for the country's aspirations towards EU accession.