Amendments to VAT Exemption Rules: New Procedures for Projects Funded by EU Funds and Donations
The Ministry of Finance adopted the Rulebook on Amendments to the Rulebook on the Procedure for Exemption from Payment of Value Added Tax by Investors and for the Supply of Certain Products and Services (“Official Gazette of Montenegro”, No. 003/26 of 9 January 2026).
The amendments significantly change the procedure for exercising the right to VAT exemption in several situations, particularly for projects financed from European Union funds, Union Programs, as well as under certain international agreements and donation agreements.
Application for VAT Exemption for EU Projects
One of the more important amendments concerns projects financed from European Union funds under indirect and shared management.
Under the new rules, the contracting authority or grant beneficiary no longer obtains the exemption merely by submitting a certificate, but submits an application for exemption to the competent state administration authority, together with a pro forma invoice or invoice for the products and services to which the exemption applies.
Under shared management, the right to exemption continues to apply to contracting authorities or project beneficiaries whose total project value, including VAT, is at least five million euros.
The certificate of exemption is issued by the state administration authority competent for the area in which the particular project is being implemented. The exemption applies to individual invoices within the contracted value, including EU funds and co-financing funds, while the beneficiary provides the supplier with a notification on the calculation of VAT at the 0% rate, together with a copy of the certificate.
Amendments Concerning Union Programs
A similar principle has been introduced for exercising the right to VAT exemption for Union Programs.
The beneficiary now submits an application for exemption to the competent authority together with a pro forma invoice or invoice for the products and services. The competent authority issues a certificate, and the exemption applies to individual invoices within the contracted value.
The Rulebook precisely lists the state administration authorities that, depending on the area in which the project is implemented, may issue a certificate for VAT exemption.
This is important for beneficiaries of various EU programs because the proper application of the exemption requires the appropriate documentation to be obtained before, or as part of, the implementation of the specific procurement.
Changes Concerning International Agreements and Donations
Amendments have also been introduced to the procedure for VAT exemption for the supply of products and services pursuant to an international agreement or donation agreement.
In this case as well, the beneficiary submits an application to the competent authority, together with a pro forma invoice or invoice for the products and services. The exemption applies to the completed supply and import of products at the level of individual invoices, within the contracted value.
However, a specific rule remains applicable to certain donation agreements. Where the agreement stipulates that tax costs will not be paid from the funds received, for the supply of products and services, the supplier issues an invoice indicating the relevant article of the law providing for the exemption. In the case of imports, the importer submits the donation agreement with a specification of the products to the customs authority. For these agreements, no separate VAT exemption certificate is issued.
VAT Exemption Certificate
The amendments also regulate in greater detail the information that the exemption certificate must contain. Among other things, the certificate includes:
- the name of the programme, contracting authority or grant beneficiary, and agreement;
- the agreement number and certificate number;
- the project implementation period;
- the legal basis for VAT exemption;
- the value of the pro forma invoice including VAT and the specification of products and services;
- the date and place of issue, as well as the stamp and signature of the authorized person.
The competent authority issues the certificate within eight days from the date of receipt of a properly completed application, i.e. a duly submitted pro forma invoice, while the certificate is submitted to the tax authority for registration within five days of its issuance.
What Do the Amendments Mean for Beneficiaries and Suppliers?
The new procedure requires greater attention when implementing projects and procurements that may be exempt from VAT. Project beneficiaries should prepare the application and relevant supporting documentation in a timely manner, while suppliers should verify whether the conditions for issuing invoices with VAT calculated at the 0% rate have been met.
It is particularly important to distinguish between situations in which a certificate from the competent authority is required and cases in which, based on a donation agreement, the exemption is obtained without issuing such a certificate.
Entry into Force
The Rulebook was published in the “Official Gazette of Montenegro”, No. 003/26 of 9 January 2026 and enters into force on the eighth day following its publication.
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