Amendments to the Law on Real Estate Transfer Tax: Construction Land within the VAT System
The Parliament of Montenegro adopted the Law on Amendments to the Law on Real Estate Transfer Tax (“Official Gazette of Montenegro”, No. 033/26 of 10 March 2026), which clarifies the tax treatment of transfers of construction land subject to value added tax.
The amendment was made to Article 6 of the Law on Real Estate Transfer Tax (“Official Gazette of Montenegro”, Nos. 36/13, 3/23 and 28/23), by adding the words “and construction land” after the words “newly constructed buildings”.
Construction Land Exempt from Real Estate Transfer Tax
Following the amendment, Article 6 of the Law reads:
“For the purposes of this Law, the acquisition of newly constructed buildings and construction land on which value added tax is payable, in accordance with the law governing value added tax, shall not be considered a transfer of real estate.”
The amendment therefore clearly stipulates that construction land on which VAT is charged is not considered a transfer of real estate for the purposes of applying the Law on Real Estate Transfer Tax.
In practice, the amendment is significant because it distinguishes between two tax regimes – real estate transfer tax and VAT. Where VAT applies to the transfer of construction land, such transfer is excluded from taxation under real estate transfer tax.
What Is Considered Construction Land?
For the proper application of this provision, it is important to take into account the definition of construction land under the VAT Law.
According to Article 4 of the VAT Law, construction land is considered to be land for which an act approving construction has been issued, in accordance with the law governing the manner and conditions for the construction of buildings.
In other words, for the purposes of this tax provision, it is not sufficient for the land merely to be designated as construction land under planning documents. The relevant act approving construction (building permit) must exist for the land, in accordance with the regulations governing construction.
The VAT Law also stipulates that construction land on which a building has been constructed forms an integral part of the total supply of the newly constructed building.
When Do the Amendments Apply?
The Law on Amendments to the Law on Real Estate Transfer Tax enters into force on the eighth day following its publication in the “Official Gazette of Montenegro”, while its provisions apply from 1 April 2026.
This means that, from this date, taxpayers and parties involved in real estate transactions should pay particular attention to correctly determining whether VAT or real estate transfer tax applies to a specific transaction.
The amendment to the Law on Real Estate Transfer Tax further clarifies that the acquisition of construction land on which VAT is payable is excluded from its scope. To determine whether particular land has the status of construction land, the definition under the VAT Law is relevant, according to which it is land for which an act approving construction has been issued.
The new rules apply from 1 April 2026, which is important to take into account when planning and carrying out transactions involving construction land.
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