Montenegro's 2026 VAT Overhaul: How to Reclaim the Tax on Invoices You Never Got Paid

You did the work, sent the invoice, charged 21% VAT on top — and then your client went bankrupt. Here is the part that stings twice: in many VAT systems, the tax office still expects you to hand over the output VAT on money that will never reach your bank account. Montenegro's February 2026 VAT amendments spell out exactly how you get that VAT back, and they add one new condition that punishes anyone who waits too long to chase the debt.

Whether you are a freelancer billing local clients, a small agency with Montenegrin customers, or a foreign business selling into the country, here is what changed, what stayed the same, and the practical steps that protect your right to a refund.

What Changed, in One Paragraph​

The Montenegrin parliament enacted a package of amendments to the VAT law published in Official Gazette no. 012/26, dated 6 February 2026, and most of them took effect that same day. The package clarifies how taxpayers correct output VAT on uncollectible receivables, brings construction land with a building permit into the VAT net from 1 April 2026, tightens the rules for non-residents selling to Montenegrin consumers, and systematizes the place-of-supply rules. A separate, brand-new EU-aligned VAT law was adopted in July 2026, but it only takes effect when Montenegro joins the EU — so the February amendments are the rules you live under today.

The Headline: Getting Output VAT Back on Unpaid Invoices​

The problem every VAT-registered business faces​

VAT is normally due when you issue the invoice, not when the customer pays. If a client defaults, you have already reported — and possibly already paid — output VAT on the sale. Every serious VAT system therefore needs a bad-debt relief mechanism: a way to reduce your output VAT once a receivable is demonstrably dead. Montenegro has one, and the 2026 amendments define its boundaries more precisely than before.

The three court decisions that unlock the correction​

Under the amended law, you may correct (decrease) your output VAT on uncollectible receivables when you hold a final court decision showing one of the following:

• Completed bankruptcy proceedings against the debtor
• Discontinued enforcement proceedings — the court tried to collect and gave up
• Concluded compulsory settlement proceedings — the formal restructuring process has run its course

Note what is missing from that list: your own judgment that the debt is hopeless, a polite email saying the client cannot pay, or an invoice that has sat unpaid for two years. None of those qualifies. The correction rides on a court document, full stop. Keep the final decision in your files — it is the single piece of paper the tax inspector will ask for.

The new catch: you must have sued first​

The key novelty in the 2026 amendments is a condition that did not exist before in this form: the receivable must have been subject to litigation before the initiation of the bankruptcy, enforcement, or compulsory settlement proceedings.

In plain terms, you cannot sit on an unpaid invoice, watch the debtor slide into bankruptcy, and then claim the VAT back. You must have already taken the claim to court — filed suit, started enforcement, asserted the debt in proceedings — before the insolvency process began.

This turns debt collection from a "when I get around to it" chore into a deadline-driven tax decision. Practical implications:

• Set an internal escalation date. If an invoice passes, say, 60 or 90 days overdue with no payment plan, that is when you talk to a lawyer — not when you hear rumors of bankruptcy.
• Paper the file from day one. Payment reminders, delivery confirmations, signed contracts, and the fiscalized invoice itself all support the litigation you may need to start.
• Small amounts still count. The law sets no minimum receivable for the correction. A freelancer owed 500 euros by a bankrupt client has the same right as a wholesaler owed 50,000 — provided the litigation condition is met.

How the correction works in practice​

The mechanism is a downward correction of output VAT — you reduce the VAT you owe, typically in the return for the period in which the qualifying court decision becomes final. The amendments do not create a separate refund application; the correction flows through your normal monthly VAT return. That makes clean bookkeeping essential: you need to trace each corrected amount back to the original invoice, the court decision, and proof that litigation predated the proceedings.

What Else Changed in the February Package​

Construction land enters the VAT net​

The sale of construction land for which a building permit has been issued is now treated as a supply of goods subject to VAT — both standalone sales and sales bundled into the first sale of a newly constructed building. Land without a building permit stays outside VAT. This change took effect 1 April 2026, and there is a transitional shield: advance payments made before that date are not caught, and no VAT adjustment is needed on final invoices for the portion already covered by an advance payment.

If you are a freelancer or small contractor in construction-adjacent services, the direct impact is limited — but if you buy, sell, or develop land, get advice before signing anything dated after March.

Non-residents selling to Montenegrin consumers face clearer registration duties​

The rules for appointing a VAT representative are now explicit for one case: a non-resident business supplying services to people who are not Montenegrin taxpayers (so-called B2C supplies) where the place of supply is Montenegro. In that situation, the foreign supplier must register a permanent establishment in Montenegro or appoint a Montenegrin VAT representative.

This matters for foreign SaaS vendors, online course sellers, consultants, and agencies with Montenegrin consumer clients. If that is you, the "we have no presence there" defense no longer works — the law now tells you exactly which presence you need.

Place-of-supply rules reorganized, not rewritten​

The provisions determining where a service is supplied for VAT purposes — the general and special rules for B2B versus B2C transactions — have been spread across several articles for clarity. The substance is unchanged. If your place-of-supply analysis was correct last year, it is still correct; only the article numbers you cite have moved.

Input VAT adjustments clarified​

The amendments spell out when you must adjust an input VAT deduction if the conditions behind the original deduction change during the year. The classic example: you deducted VAT on goods or assets meant for taxable activity, then redirected them to exempt or private use. Review any mid-year change of use before year-end rather than discovering it in an audit.

The Bigger Picture: A New VAT Law Waiting for EU Accession​

In July 2026, Montenegro adopted a completely new VAT law built on the EU's common VAT framework, Council Directive 2006/112, including newer EU digitalization rules and refund provisions for foreign taxable businesses. But — and this is the part to get right — the new law does not apply yet. It is written to operate inside the EU's fiscal territory, using concepts like intra-Community acquisitions and automated cooperation between EU tax administrations that cannot function while Montenegro is outside the Union. The current system, including the February amendments, remains fully in force, and the Tax Administration has confirmed the February changes carry over.

What does that mean for your planning?

• Keep complying with today's rules. Invoicing, fiscalization, registration, and monthly returns continue unchanged.
• Start preparing early anyway. Post-accession, trade with EU member states stops being import/export with customs declarations and becomes intra-EU supply tracked through invoices and electronic data exchange. Accounting software, contract tax clauses, and staff training all need lead time.
• Watch the threshold and rates. The framework keeps the 21% standard rate with 15% and 7% reduced rates and a 30,000 euro registration threshold — but accession-day details always deserve a fresh check.

Your Practical Checklist​

1. Age your receivables monthly. Any invoice drifting past your escalation point without a payment plan is a future VAT correction at risk — start the legal process while the debtor is still solvent enough to sue.
2. Litigate before insolvency, not during it. The new condition rewards creditors who act early. A filed claim beats a hopeful wait every time.
3. File court decisions with the invoice. Staple — digitally, at least — the final bankruptcy, enforcement, or settlement decision to the original invoice and the litigation record. That bundle is your correction.
4. Correct output VAT in the right period. Claim the decrease when the qualifying decision becomes final, and make sure the audit trail runs from return line back to invoice.
5. If you sell B2C into Montenegro from abroad, fix your registration. Permanent establishment or local VAT representative — pick one and document it.
6. Revisit input VAT deductions at year-end. Any asset or goods that changed use during the year may need an adjustment.
7. Track the accession timeline. The EU-aligned law is adopted but dormant; build your systems so the switchover is a configuration change, not a panic.

Keep Your VAT Audit Trail Effortless​

Bad-debt VAT relief is won or lost in the bookkeeping: the original invoice, the payment reminders, the litigation filing, the court decision, and the corrected return all have to connect. Beancount.io gives you plain-text accounting that is transparent, version-controlled, and AI-ready — so every correction traces back to its source document years later. Get started for free and keep your receivables ledger audit-proof from day one.