Modern tax systems are based on combination of residency and sources as of deciding factors during determination of tax jurisdictions.
Residents are subject to unlimited tax obligation. Unlike them, non-residents are, by the principle of territoriality, subject to limited obligation of tax paying.
Residency means permanent or temporary presence of individuals in the certain territory. In Montenegro this concept is defined in the Law of tax income of individuals.
In the article 3 stands that a resident is an individual who:
- in the Montenegrin territory is in possession of residence or center of business or life interests;
- stays in Montenegrin territory more than 183 days in tax year and
- Montenegrin resident is also an individual who is directed out of Montenegro for doing business on behalf of individual or legal entity who is resident of Montenegro or for the International organization.
The concepts of residency and sources have deciding influence on the amount of tax liability of a taxpayer who makes their incomes within different National tax systems.
The possibility in tax planning in order to reduce tax burden is extremely acceptable for the taxpayers.
