director - Ministarstvo finansija

REPUBLIC OF MONTENEGRO
MINISTRY OF FINANCE
BULLETIN III
JANUARY-MARCH 2006.
www.ministarstvo-finasija.vlada.cg.yu
TAX ADMINISTRATION: www.poreskauprava.vlada.cg.yu
CUSTOMS OFFICE: www.gom.cg.yu/carine
ANTI-CORRUPTION DIRECTORATE: www.antikorup.vlada.cg.yu
DIRECTORATE FOR ANTI-MONEY LONDERY: www.gom.cg.yu/aspn
DIRECTORATE FOR REAL ESTATES: www.nekretnine.cg.yu

TABLE OF CONTENTS
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Projest „1000
HOUSING LOANS”
TABLE OF CONTENTS
4-5
INTRODUCTION
- Igor Lukšić, PhD, Minister of Finance
6-9
PROJECT "1000 HOUSING LOANS"
10-17
GUIDEBOOK TO THE TAX SYSTEM
- Koviljka Mihailović, Assistant Minister of Finance
18-21
BUDGETARY SUFICIT
- Mirjana Pešalj, Director, Tax Administration
22-23
TAX ADMINISTRATION
- Gordana Stajčić,
Chief of Cabinet, Tax Administration
24-26
REPORT ON PUBLIC
DEBT OF MONTENEGRO
- Nikola Vukićević, M.Econ,
Coordinator, Public Debt Department
27-28
COOPERATION WITH THE WORLD BANK
- Jadranka Radunović, Coordinator,
International Co-operation Division
2

TABLE OF CONTENTS
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
29-30
31-32
33
34-35
36
37-40
41-42
43-48
STATE AID
- Danijela Jauković, Advisor to the Minister
on Co-operation with the EU
and International Financial Institutions
ENFORCEMENT OF CLAIMS
SECURED UNDER THE CONTRACT
ON FIDUCIARY TRANSFER
OF TITLE TO REAL ESTATE
- Milodarka Novosel, Senior Advisor
ENFORCEMENT OF CLAIMS OF THE GOVERNMENT
OF MONTENEGRO IN COURT PROCEEDINGS
- Gordana Vukoslavčević, Senior Advisor
FUNCTIONING OF THE GAMES OF CHANCE SYSTEM
- DEPARTMENT FOR GAMES OF CHANCE;
Radmila Vorotović, Head
Veljko Begović, Chief Inspector
LAW ON COMPULSORY INSURANCES
IN TRAFFIC
INSURANCE SUPERVISION SERVICE,
Milanka Obradović, Coordinator of the Service
AGENDA OF THE MINISTRY
OF FINANCE FOR 2006
OVERVIEW OF THE ACTIVITIES
OF THE MINISTER OF FINANCE
- PR SERVICE OF THE MINISTRY
- Ana Miljanić, Spokesperson, Maja Bašić, Senior Employee I
MACROECONOMIC
REPORT
Republic of Montenegro
Ministry of Finance
Bulletin of the Ministry of Finance
January-March 2006
NUMBER:
3
PUBLISHED:
quarterly
PUBLISHER:
Republic of Montenegro
The Ministry of Finance
FOR PUBLISHER:
Igor Lukšić Ph.D.
EDITOR-IN-CHIEF:
Ana Miljanić
EDITORIAL BOARD:
Koviljka Mihailović, Milorad Katnić
M.A., Milan Dabović PhD
TRANSLATOR:
Jelena Čađenović
Design:
Adil Tuzović
CONTACT:
PR Office of the Ministry of Finance
TEL:
+381 81 224 581
FAX:
+381 81 224 450
E-MAIL:
mf@mn.yu
WEB:
www.ministarstvo-finansija.vlada.cg.yu
ADDRESS:
Stanka Dragojevića 2, Podgorica
PRINT:
Grafotisak
COPYES:
500
3

Introduction
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
MINISTER OF FINANCE
IGOR LUKŠIĆ, PH.D.
Introduction
CONTACT:
PHONE:
+381 81 242-835,
FAX:
+381 81 224 450
E-MAIL:
mf@mn.yu
WEB:
www.ministarstvo-finansija.vlada.cg.yu
Dear Readers,
An overriding impression throughout
2005 about Montenegrin
economy being out of recession was
definitely confirmed in the first
quarter of 2006. Favourable macroeconomic
indicators achieved over
the last couple of years, convincingly
prove the macroeconomic stability
required for further growth and development.
Favourable trends are likely
to continue in the course of
2006. Significant increase of the tax
revenues as compared to planned
ones, indicates considerable reduction
of grey economy, and more important,
stronger economic activities.
Expectations of excellent tourist
season, positive effects from restructuring
and privatization of the
banking sector, strong inflow of Foreign
Direct Investments etc., speak
in favour of viability and progress
of Montenegrin economic system.
The above also serves as a proof that
a proper economic policy has been
conducted in the previous period.
Finally, the IMF gave its opinion
about this in early February, when
a three-year arrangement was completed,
which, in addition to having
positive effect on image of Montenegro,
led to further write-off of liabilities
to the Paris Club. Following
regulation of Montenegro
membership to the international
financial institutions, creation of a
new program of co-operation with
the IMF is ahead of us, particularly
in the area of further structural reforms.
In addition to standard program
elements, more attention
should be paid on finances of local
self-governments and public finances
in general, including public
companies. Introduction of the II
pension pillar and continuation of
reforms in the health system will be
key reforms in the forthcoming period.
4

Introduction
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Cabinet-meeting of the Ministy of Finance
Regardless of the highly important
and politically deciding moment,
the reform process may not be
delayed. Particularly important activities
for this year are related to finalization
of a set of property laws,
which are now in the final phase.
Full liberalization of the real estate
market and clear land registers will
further strengthen Montenegro's attractiveness
as an investment location.
Law on Property Rights, Law
on State Property and Law on Survey
and Cadastre are in their final
phase.
Continuation of the tax reform
process aimed at creating a favourable
business environment is also noteworthy.
Introduction of a singlerate
income tax and setting non-taxable
income threshold will make
Montenegro a leading country
among countries with favourble tax
treatment. High competition within
Europe, particularly competition
imposed by new EU member states,
sets our task that Montenegro should
become a champion in liberalization
of its market. This chance should
be used because our region is becoming
one of the most important
markets not only in Europe, but globally
as well. Efforts made at establishing
free trade zone in the region
clearly define this chance.
Functional economic sovereignty
as well as achieved economic selfsustainability
of Montenegro should
logically be continued within formal
independence and international recognition
of Montenegro, which will
facilitate communication with the
partners from the international
community. Montenegro, being one
of the European centers rather than
a part of a Union, will be enabled to
participate in and encourage economic
integration processes on equal
footing. As a result, it will be more
simply to promote numerous resources
which serve for economic development.
Sincerely,
Igor Lukšić, PhD
5

PROJECT "1000 HOUSING CREDITS”
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
PROJECT
„1000 HOUSING
CREDITS”
Project "1000 Housing Credits" was worked out by the
Ministry of Finance and Commission for Housing Issues in
consultation with Montenegrin banks, in order to accomodate
a great number of requests on the basis of unresolved, i.e.
inadequately resolved housing issues of the Montenegrin citizens,
especially citizens employed in the public administration.
Namely, market interest rates and personal income
amount for the greatest number of citizens represent a limitation
to apply for a housing credit in a bank according to bank's
standard terms. In that sense, the Ministry of Finance considered
it appropriate to work out a project, in consultation with
other banks, in order to support as many citizens as possible
to use housing credits, which will be repayable from regular
income within longer repayment periods and with "low"
interest rates.
Longer repayment periods and "low" interest rate implied
possibility of "subsidizing" interest rates. Thereby, we proceeded
from parameters such as: average annual anuity, average
public administration income and average income in the
Republic, in general, average price of monthly rent, average
price of a housing space square meter etc. It was considered
necessary to create conditions to provide for average monthly
anuity in line with average flat rent costs, i.e. maximum halfincome
of a Montenegrin household.
Communication of the Ministry of Finance with the
Montenegrin banks was done through several direct meetings,
which resulted in formulation of concrete offers.
Contract between the Government of the Republic of
Montenegro and representatives of Crnogorska komercijalna
banka, Podgoricka - Societe Generale Bank and Montenegro -
NLB Bank, was signed on April 4, 2006. After that, in the
framework of the Project "1000 housing Credits - We create
conditions for independent life", the contract was signed with
HYPO Alpe - Adria a.d. Podgorica on April 14 and with
Niksicka Bank on April 17.
Contract between the Government of the Republic of Montenegro and
representatives of Crnogorska komercijalna banka, Podgoricka -
Societe Generale Bank and Montenegro - NLB Bank, was signed on
April 4, 2006
The contract was signed with HYPO Alpe - Adria a.d. Podgorica on
April 14
The contract was signed with Niksicka Bank on April 17
6

PROJECT "1000 HOUSING CREDITS”
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
1000 HOUSING CREDITS
- WE CREATE CONDITIONS FOR INDEPENDENT LIFE
GOVERNMENT OF THE REPUBLIC OF MONTENEGRO
IN COOPERATION WITH
Crnogorska Komercijalna Banka, NLB Montenegrobanka
PodgoriČka Banka-Societe Generale Group and HYPO Alpe Adria Bank
REALIZES PROJECT
"1000 HOUSING CREDITS"
Who can be the housing credit beneficiary?
Citizens of Montenegro, who earn regular income from their
permanent employment and in accordance with the criteria
envisaged by the project of the Government of the Republic of
Montenegro ''1000 housing credits".
Basic information on the housing credits terms
- Credit repayment period:
- up to 5.000 eur - repay,ment period up to 5 years;
- up to 15.000 Eeur - repayment period up to 10 years;
- up to 30.000 eur - repay,ment period up to 20 years.
- Interest rate 4% annually.
- Fee for credit utilization 0,5%.
- Security depending on term of payment by means of an
endorser or mortgage.
INDIVIDUAL TERMS TO BE FULFILED
IN ORDER TO BE GRANTED
A CREDIT BY BANKS RESPECTIVELY
NLB MONTENEGROBANKA
- Customer has to be at least 6 months permanently
employed at the time of submitting the claim;
- The required monthly instalment is to be maximum
40% of regular monthly income reduced by the existing liabilities,
or joint family income(reduced by the living
expenses);
- One or more creditworthy guarantors are required for
amounts up to 7.000 eur;
- Mortgage on real estate, which value is 2 times higher
than the credit value, is required for amounts exceeding 7.000
eur;
- Bank reserves the right to refuse granting the credit or to
require additional security in accordance with the credit history
of the customer and financial standing estimate.
Required documentation:
For credit applicant:
- ZKS form duly filled in (all spaces, empty spaces to be
crossed out ) and signed by the borrower;
- Certificate of the income amount of the borrower, certified
by the employer and signed by the borrower;
- Two administrative bans for borrower, certified by the
employer (address of the accounting department is obligatory!);
- Duly signed bill of exchange in one's one hand and filled
in by the endorser with complete data: name and surname,
employer, address, ID card No.;
- Preliminary estimate(pro-forma invoice) of the employer
or Purchase-sale Contract (basis for transfer of funds),
- Photocopy of the valid ID card or passport of the borrower.
For endorser;
- Certificate of the income amount for endorser/s, certified
by the employer and signed by the endorser/s;,
- Declaration of endorser duly certified in the court or by
the bank employee,
- Administrative ban for endorser/s, certified by the employer
(address of the accounting department is obligatory!),
- Photocopy of valid ID card or passport of the endorser.
All forms and explanations can be found at the bank counter or
taken from the website of the bank: www.montenegrobanka.com
CRNOGORSKA KOMERCIJALNA BANKA AD PODGORICA
In order to exercise the right to special purpose credit for purchase
of a flat or house or reconstruction of a flat/house it is
required that credit beneficiary receives the income through
CKB and that monthly income burden is up to 1 of the monthly
income.
Required documentation:
- Claim for credit grant approval
7

PROJECT "1000 HOUSING CREDITS”
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
- Bill of exchange and bill of exchange authorization
- real estate certificate on the basis of which a contract on
mortgage is signed
- Flat or house purchase contract with seller
- Copy of Identity Card
Bank's Credit Committee leaves a possibility to ask for additional
security (insurance, endorser...
These credits are extended without DOWN PAYMENT and
DEPOSIT, and in case of pre-term credit repayment the fee for
the remainder of debt is not collected.
2-3 endorsers (without mortgage) can be provided as credit
security for credit amounts up to 5.000 eur.
PODGORIČKA BANKA - SOCIETE GENERALE GROUP
General terms for submitting a credit claim:
- Hold an account with PodgoriČka Bank, Societe Generale
Group;
- Purchase and sale Contract (preliminary contract) certified
in court;
- Only a member of immediate family, who meets the same
conditions as Debtor (only two persons preferable), can be in
capacity of Co-debtor;
- Debtor and Co-debtor must receive at least 1 salary to the
account (apart from other banks' employees);
- Certificate from official records of the Bank on personal
income funds transferred to the current account for the credit
beneficiary and co-debtor in case of combined income
- If the difference between the income amount stated in
the certificate and the income amount according to the inspection
of account proves to be higher than 15%, the claim is
refused.
- If the difference between the income amount stated in
the certificate and real income transferred through the account
proves to be up to 15%, the claim is worked out on the basis of
the income transferred through the account
- Debtor has to be at least 23 years old at the moment of
submitting the claim, and not older than 65 years at the
moment of the last credit instalment maturity (the same conditions
are valid also for co-debtor in case that his/her salary is
included in the total encumberance);
- Debtor has to be employed permanently for at least 6
months period (the same conditions are valid also for codebtor
in case that his/her salary is included in the total
encumberance);
- Certificate of personal income for credit beneficiary in
case that the customer submits a claim only on the basis of
his/her income, and certificate on the spouse's income if the
total income is encumbered (in that case both partners in
marriage have to receive salary through the Bank account);
- Declaration of the credit beneficiary about transfer of personal
income funds to the current account in the PodgoriČka
Bank if the customer submits a claim only on the basis of
his/her income, and declaration of co-debtor if the ratio
includes total income (in that case both partners in marriage
have to transfer the salary through the Bank account);
- Declaration of salary transfer to the account is not
required for other banks' employees as they are not able to
transfer their income to thePodgoriČka Bank account.
Credit security:
- Bill of exchange, (signed also by the Co-debtor if his/her
salary is included in the total encumberance);
- Administrative ban for Debtor (and Co-debtor if its salary
is included in the total encumberance);
- Proof of ownership of real estate to be offered as mortgage;
- Real estate certificate not older than 1 working day,
which proves that the real estate to be mortgaged is registered
with a note that "there are not any encumberances or limitations";
- Bank's estimator assessment of the value of real estate to be
mortgaged. Estimate is to be based on the construction value;
- Life insurance policy of debtor vinculated in favour of
PodgoriČka Banka - policy value needs to be concluded in
compliance with the credit amount and period of duration;
- Insurance policy for the construction value of the real
estate to bemortgaged against basic and supplementary risks
of water drain, vinculated in favour of PodgoriČka Bank;
- First MORTGAGE on real estate, which is subject matter
of purchase or on other relevant real estate;
- If the real estate to be credited is mortgaged, down payment
of 25% is obligatory;
- If some other real estate is mortgaged, ratio between that
real estate value and value of the real estate to be credited
must be 1.25:1 and in that case down payment is not required;
- The real estate owner's approval to mortgage the property,
as well as his/her spouse's approval (if he/sheis the owner
of real estate in marriage) certified in the relevant court;
- Surety Contract signed by the Co-debtor (if his/her salary
is also included in the total encumberance).
HYPO ALPE ADRIA BANKA
Terms for submitting a credit claim:
- Claimant holds Montenegrin citizenship
- Age: from 18 - and the last annuity is due before the age of 65
- Account with the Hypo Bank: regular account holder
- Employment: permanent employment
Credit capacity of the parties to the credit:
- Monthly annuity has to be equal or less than 50% (1/2)
8

PROJECT "1000 HOUSING CREDITS”
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
of the net monthly income after other deductions
- If the beneficiary does not fulfil the aforementioned
credit capability condition, credit capability can be supplemented
Documentation needed:
- Credit Claim Form filled in
- Borrower Data Form filled in
- Administrative ban on all parties to the credit;
- Certificate/Declaration form filled in and certified
- Photocopies of identity cards of credit beneficiaries and
joint guarantors
- Certified payment orders of earnings for the last three
months of all parties to the credit
- Abstract from property registers and Real Estate Register,
not older than 3 days ;
Security instruments:
- Two creditworthy indorsers for credits up to eur 5.000
- First mortgage of the least estimated value of 1:1,25, for
credits to the amount higher than eur 5.000
- Real estate insurance against basic risks;
- Administrative ban of credit beneficiary (endorser);
- Bill of exchange authorization signed by the credit beneficiaries
and joint gaurantor
- Bill of exchange signed by all parties to the credit;
- Life insurance for credits to the amount higher than eur
5.000 and repayment period longer than 10 years
- Joint Guarantee Contract or Declaration of Joint
Guarantee
- Bank can require additional security
NIKŠIĆKA BANKA AD NIKŠIĆ
Interest rate and other expenses:
- Fixed interest rate: 6,4% annually, out of which share of
the interest rate repayment of the Government of the Republic
of Montenegro is 2,4%, while the rest 4% is repaid by the credit
beneficiary;
- Default interest rate: One third of regular interest rate,
augmented by one percentage point in relation to the normal
interest rate;
- Fee: 0,50% one-off payment from the amount of the
extended credit, on the occasion of granting the credit;
- Pre-term credit repayment: 2,00% for the remaining
amount of the credit principal;
Credit risk security:
- Three endorsers, certified administrative bans for credit
beneficiary and endorsers (i.e. permanent order of suspension
of a part of income to the benefit of the Bank) and a blank bill
of exchange with the credit beneficiary's acceptance, avalled by
the endorser are needed for credits up to eur 5.000,00;
- For credits from eur 5.001,00 to eur 30.000,00, first mortgage
is taken out and the credit beneficiary submits to the
Bank also 2 (two) certified administrative bans (i.e. permanent
order of suspension of a part of income to the benefit of the
Bank) and a blank bill of exchange with the credit beneficiary's
acceptance. Apart from the housing space which is being purchased
or reconstructed from the credit funds, the credit beneficiary
can offer also another's real estate as mortgage to be
taken out in favour of the Bank, with presentation of its
owner's approval certified by court. Minimum value of the
hypotecated real estate must be by 50% higher than the credit
amount to be extended. Estimate of the real estate value in
order to take out a mortgage is done by the Directorate for
Real Estate of the Republic of Montenegro.
Property insurance
- on the occasion of concluding the credit, credit beneficiary is
obliged to present to the Bank an insurance policy of the hypotecated
real estate, which is vinculated in favour of the Bank.
Required documentation:
- credit claim,
- certificate of the income amount,
- request for issuing a permanent order for suspension to
the Bank or administrative bans,
- blank accepted (avalled) bill of exchange,
- Copies of Identity Cards for credit beneficiary, co-debtor
and endorser,
- Real estate certificate for mortgaged real estate, i.e. a copy
of urban plan paper (only for house, if it is mortgaged),
- insurance policy of hypotecated real estate,
- certificate of the housing space ownership (for adaptation
and reconstruction), i.e. certificate of non-ownership of a
housing space (for purchase crediting),
- certificate of household,
- certificate of years of service.
Credit realization:
- Credit up to eur 5.000,00 is disbursed by transfer to the
credit beneficiary's account, which is open with the Bank.
- Credit exceeding eur 5.001,00 is disbursed to the Bank giro
account of the housing space sellers or contractor of adaptation
or reconstruction works
9

Guidebook to the tax system
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
KOVILJKA MIHAILOVIĆ, ASSISTANT TO THE MINISTER OF FINANCE
Guidebook to the
tax system of
Montenegro
Introductory Remarks
Montenegro launched reforms of the tax system and overall financial system in 2001.
Main objectives of the tax reform are primarily focused on: encouraging domestic production
and investments; making Montenegro more attractive to foreign investors; making locally
produced goods more competitive at foreign markets; harmonization of the tax system with the EU Directives and international
standards; making the tax system simpler, more efficient and easier for implementation; and generating income required for
budget needs support. The tax reform is based on the principles of simplicity, fairness, impartiality, efficiency, stability and applicability.
Key segments of the tax reform are: introduction of the value added tax (which has been applied since 1 April 2003), which replaced
previous retail tax; and use of the self-assessment principle according to which a tax liability is calculated by a taxpayer himself,
while the related procedure is controlled by a tax authority. In addition, the tax administration has also been transformed, and
some competences related to collection of local revenues have accordingly been delegated to the local self-government.
STRUCTURE OF THE TAX SYSTEM
Montenegrin Tax System includes the following taxes:
1. Customs and other Duties,
2. Excises,
3. Value Added Tax,
4. Corporate Income Tax,
5. Personal Income Tax,
6. Property Tax,
7. Real Estate Transfer Tax,
8. Insurance Premium Tax,
9. Tax on Use of Passenger Motor Vehicles, Vessels and Aircraft
10. Contributions for Compulsory Social Insurance (pension,
disability, health and unemployment insurance),
11. Sales Tax on Used Motor Vehicles, Vessels and Aircraft,
12. Republic Stamp Duties (administrative fees and duties, court
fees, registration fees),
13. Charges for Use of Natural Resources of Common Interest
(forests, waters, mineral resources, roads, coastal zone, organization
of games of chance), and
14. Local Revenues (taxes, charges and fees).
The Table below shows a comparative review of structure of
realized revenues by individual tax types and levels (Republic
and Local level) for 2003 and 2004.
10

Guidebook to the tax system
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
MAIN CHARACTERISTICS
OF RESPECTIVE TAX TYPES
1. CUSTOMS AND OTHER DUTIES
The customs system is regulated by the Customs Law ("Official
Gazette of RM", No. 07/02, 38/02, 72/02, 21/03, 31/03 and
29/05), Law on Customs Tariff ("Official Gazette of RM", No.
75/05) and Law on Customs Administration, including relevant
by-laws adopted on the basis of the above laws.
The Customs Law regulates the customs procedure; rights and
liabilities of persons participating in the customs procedure; and
rights, liabilities and powers of the competent authority for clearance
of goods.
Law on Customs Tariff regulates nomenclature of goods and
amount of tariff rates. The Law covers 10.229 of tariff items, the
number of which has been increased by 1.675 or 19,58% comparing
to previous solution. Average nominal tariff protection rate is
6,17%.
Customs duty is charged and levied as a percentage of the value
of goods ("ad valorem"), ranging from 0% to 30%, or as an amount
of local currency per unit of measurement (specific duty) for import
of certain agricultural products. No customs duty is levied on
exported goods.
Law on Customs Administration regulates scope of work of
the tax authority (The Customs Administration) as well as rights, liabilities
and responsibilities of the customs officers.
2. EXCISES
Excise tax payment liability is regulated by the Excise Tax Law
("Official Gazette of RM", No. 65/01 and 76/05), which was adopted
at the end 2001, and has been in force since 1 April 2002, and
by regulations adopted on the basis of the said Law. The Law was
amended at the end of 2005, mainly with respect to manner of calculation
and payment of excise tax on cigarettes.
Excise tax is levied on: alcohol and alcoholic beverages, tobacco
products, and mineral oils, mineral oil products and substitutes.
Excise tax on alcohol and alcoholic beverages is payable at
the following rates:
- EUR 1,90 per alcohol volume content per hectoliter of beer
- EUR 0 (zero) per hectoliter of table wine;
- EUR 35 per hectoliter of sparkling wine;
- EUR 40 per hectoliter of other fermented beverages
- EUR 70 per hectoliter of light alcoholic beverages;
- EUR 550 per hectoliter of pure alcohol
Excise tax on mineral oils, mineral oil products and substitutes
is paid as follows:
Gasoline and other light oils:
- Euro 0.120/kg for aviation gasoline (tariff code CN 2710.00 11
10);
- Euro 0.364/liter for motor unleaded gasoline (tariff code CN
2710.00 11 20);
- Euro 0.120/kg for fuel for jet gasoline motors (tariff code CN
2710.00 11 30),
- Euro 0.364/liter for other types of motor fuel (tariff code CN
2710.00 11 90);
Kerosene:
- Euro 0.120/kg for petroleum (kerosene) for motors, (tariff code
CN 2710.00 21 10);
- Euro 0.120/kg for fuel for jet kerosene motors (tariff code CN
2710.00 21 20);
- Euro 0.120/kg for other types of kerosene (tariff code CN
2710.00 21 90);
- Euro 0.069/kg for fuel for jet kerosene motors (tariff code CN
2710.00 21 20), which is used for heating;
Gas oils:
- Euro 0.270/liter for Diesel fuel (tariff code CN 2710.00 31 00);
- Euro 0.120/liter for Diesel fuel (tariff code CN 2710.00 31 00)
which is used as heating oil;
- Euro 0.270/liter for ship and other fuels (tariff code CN
2710.00 32 00);
- Euro 0.120/liter for other oils (tariff code CN 2710.00 39 00);
Heating oils:
- Euro 0.023/kg for low-sulfur oil for metallurgy (tariff code CN
2710. 00 41 00);
- Euro 0.023/kg for other heating oils (tariff code CN 2710. 00
49 00);
Oil gas and other gas hydrocarbons:
- Euro 0.069/kg for mixtures of propane and butane gas (tariff
code CN 2711.19 00 10)
- Euro 0.069/kg for other oil gas (tariff code CN 2711.19 00 90).
Excise tax on cigarettes includes specific and proportional excise
tax. Specific excise tax for all cigarettes amounts 1,00 eur/kg
(0,02 eur/per pack). Proportional excise tax is 26% of retail cigarette
price including excise tax and VAT.
Retail price of cigarettes is determined by manufacturer himself
or by importer and the same is published in the "Official Gazette of
RM".
Excise tax for other tobacco products is paid per kilogram
and amounts:
- Euro 10/kg for cigars and cigarettes,
- Euro 20/kg for shredded tobacco (for rolling cigarettes),
- Euro 15/kg for other smoking tobacco
Excise Taxpayer is a manufacturer or importer of excise goods
or person to which excise tax liability may be transferred in conformity
with the Law (excise licensee, tax exempt user).
Excise tax liability arises when the excise goods is produced
on the territory of Montenegro or imported into Montenegro.
Excise tax is paid on imported excise goods concurrently with
payment of customs duties, except for cases when deferred excise
tax payment is allowed (storage in a customs warehouse or plant of
a tax exempt user).
Excise tax liability on cigarettes arises on a day of taking over
the control excise stamps issued by the Tax Administration.
Local excise taxpayer calculates excise tax by himself. The excise
tax is calculated on monthly basis, while the calculation is given in
a tax return which is to be filed with the tax authority until 15th
day of a month for the previous month, which is also a deadline
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for payment of such tax.
In exceptional cases, excise tax on cigarettes is paid within 60
days from the day of taking over the control excise stamps.
Marking of excise goods - Prior to their releasing into use or
free sale, a producer or importer shall mark tobacco products and
alcoholic beverages, except for beer, with excise tax stamp.
Tobacco products and alcoholic beverages to be exported for
which foreign supplier failed to submit the excise tax stamps, shall
be marked with a special export stamp.
Tobacco products and bottled alcoholic beverages which are
sold in duty free shops should be marked with a separate stamp.
Marking of tobacco products and alcoholic beverages with control
excise stamps is regulated in detail under the Decree on Marking
Tobacco Products and Alcoholic Drinks with Control Excise Stamps
("Official Gazette of RM", No. 82/05).
3. VALUE ADDED TAX (VAT)
Value added tax liability ("Official Gazette of RM", No. 65/01,
38/02, 72/02, 21/03 and 76/05),is regulated by the Value Added
Tax Law, which was adopted at the end of 2001, and has been effective
from 1 April 2003, and by regulations stemming from the
said Law. The Law is based on the EU Directive VI Guidelines. Taxation
of products and services is done according to the place of consumption,
using a principle of consignment point or destination.
Export of goods is exempt from VAT payment (zero rate is applied),
while import of good is taxed, having the same treatment as domestic
products at local market.
Tax liability is determined according to the invoice method, or
method of deduction of "tax on tax". Taxpayer determines a tax liability
alone, by reducing his tax liability on the account of turnover
of goods and services by the amount of calculated or paid VAT
on purchase of goods and services or import of goods.
Subject of taxation - Value added tax is calculated and paid
on: delivery of goods and services rendered by a taxpayer for a consideration
in the framework of his business activities; and on import
of goods.
Newly constructed real estate is also subject to taxation (land is
not subject to taxation).
Tax rates - The Law sets forth two positive tax rates: standard
tax rate of 17% and lower tax rate of 7%.
Zero rate is applied on export transactions and on delivery of
medicines and medical devices which are funded by the Republic
Health Insurance Fund.
Lower tax rate of 7% is applied on:
1) Staple-foods (milk, bread, fat, oil and sugar);
2) Medicines, including medicines for veterinary use, except for
prescription drugs covered by the Republic Health Insurance Fund.
3) Orthotic and prosthetic devices, and medical devices surgically
implanted in human body, except for medical devices covered by the Republic
Health Insurance Fund;
4) Textbooks and teaching aids;
5) Books, monographies and serial publications;
6) Accommodation services in hotels, motels, aparthotels, tourist
settlements, pansions, camps and villas;
7) Drinking water, except for bottled water;
8) Daily newspapers and periodicals, except for press, which fully
or mostly includes advertising contents;
9) Public transportation of passengers and their personal luggage;
10) Public hygienic services;
11) Funeral services and products related to such services;
12) Copyrights and services in the field of education, literature and
art;
13) Copyrights in the field of science and artifacts, collections and
antiquities;
14) Services charged through tickets for cinema and theatre shows,
concerts and similar cultural and sports manifestations, except for those
legally exempt from VAT
15) Use of sport facilities for non-profit purposes;
16) Fodder, fertilizers, pesticides, reproduction seeds, seedlings and
breeding stock.
Tax Exemptions - Law provides for several types of exemptions:
for services of public interest (public postal services, health services,
social security services, pre-school education services, sport, religious
and other public services); import of goods (products brought
in Montenegro within transit customs procedure, services relating
to import of goods etc.); temporary import of goods (products
imported on temporary basis provided that they are exempt
from customs duty according to the custom regulations), and special
exemptions (import of goods to be inspected by the customs
authority; products that enter free customs zone or free customs
warehouse; and products under the customs storage procedure or
under import procedure for export on the basis of delay)
Tax period means a calendar month. Taxpayer is obliged to file
monthly VAT return. Tax return is filed by the 15th day in a month
following the month for which a tax liability is paid. VAT on import
is paid concurrently with the customs duty payment. (VAT is a part
of the customs liability).
VAT Refunding - Taxpayer shall be refunded VAT for: local transactions
within 60 days from the day of filing VAT to be calculated
(until 1 January, the deadline was 90 days); major importer and
taxpayer disclosing more than three times in row a surplus of input
VAT shall be refunded such VAT within 30 days from the day of filing
VAT to be calculated (previously, 60 days).
Special taxation procedures - Special taxation procedures are
provided for small entrepreneurs, farmers, travel agencies and sales
agents of used products, artifacts, collections and antiquities. Small
entrepreneurs, whose taxable income is less than 18.000,00 eur for
* Until 1 January 2006, single tax rate of 17% was applied. Since then, lower tax rate of 7% is effective.
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the last 12 months, are not obliged to register for VAT payment. If
they register for VAT by themselves, they shall be obliged to stay within
the system for three years. Farmers (who are not VAT payers) are
entitled to lump sum remuneration to the amount of 5% of their
products sale price (with respect to this amount, a taxpayer who
purchased agricultural products shall be granted a tax credit)
4. CORPORATE INCOME TAX
Corporate income tax liability is introduced by the Law on
Corporate Income Tax (Official Gazette of RM, No. 65/01,
80/04), which was adopted at the end of 2001 and has been in force
from 1 January 2002 and by regulations passed on the basis of
the said Law. The Law was amended in 2004, regarding tax rates and
tax relieves.
Corporate Income Taxpayer - Corporate income taxpayer is a
resident or non-resident legal person performing an activity for
profit earning. A limited partnership is also subject to corporate income
tax. Resident legal person is a person established in the Republic
of Montenegro or has its place of management and control on
the territory of Montenegro. Non-resident legal person is a person
that is not established in the Republic of Montenegro and has its
place of management and control outside of Montenegro.
Subject of taxation - Profit made by a resident in or outside of
Montenegro is subject to taxation. Profit made by a non-resident
in Montenegro is subject to taxation. Profit made by a permanent
business unit of a non-resident is subject to taxation. Permanent
business unit means permanent place of business through which
a legal person fully or partially runs its business and which is organized
in one of the following forms: head office, branch office, office,
factory, workshop, mine, oil or gas fields, quarry or any other
place where natural resources are being exploited. Construction site
or assembled structure shall be deemed a business unit only if it
lasts more than six months.
Sources of income are profits made from: sale of goods produced
in Montenegro; providing services in Montenegro; interest realized
by a resident taxpayer or permanent business unit of non-resident;
dividends paid by resident; use of property rights in Montenegro;
exploitation of natural resources; immovable and movable
property located on the territory of Montenegro; sale of immovable
and movable property if the seller of which is in Montenegro;
insurance and re-insurance against risk realized in Montenegro; other
income from operations in Montenegro.
Corporate income tax is not paid by: the Central Bank of Montenegro,
public funds and public institutions which are established
by Montenegro or local self-government, except for profit made by
selling of goods and services on the market.
Tax base and tax rate - Corporate income tax base includes
taxable income of a taxpayer. Corporate income tax rate is proportional
and amounts 9% of the tax base.
Taxpayer is obligated to account for, withhold and pay tax after
deduction for payments made on the basis of: dividends and share
in the legal person's profit, royalties, interests and revenues from
the lease of real estate paid to a non-resident legal person. The tax
rate amounts to 15%, except for interests for which the tax rate
amounts to 5%.
Withholding tax is not paid on dividends and shares in profit
used for increase of equity of a taxpayer.
Tax exemptions - A newly established legal entity that conducts
a production activity in an economically underdeveloped municipality
is exempt from paying profit tax for the first three years
upon the start-up of the activity.
Newly established business unit conducting a production activity
in an underdeveloped municipality is also exempt from paying
profit tax for a period of three years, in proportion with the share
of such profit in the total profit of the taxpayer.
The Law provides for three types of tax relieves, as follows:
On the basis of hiring new employees - Tax base shall be reduced
to a taxpayer who hires new employees for a permanent employment
in a business year, but not less than two years, by gross
salaries of such employees plus pertaining contributions for compulsory
social insurance paid by employer. This tax relief shall be
applied for a period of one year from the day of hiring a new employee.
On the basis of investments in securities - If profit from capital
investment is used for purchase of new securities, such profit is not
taxable, if it is reinvested within 12 months from its arising. Profit
from sale of securities held by a taxpayer for more than two years
in his portfolio is exempt from taxation.
For program activities of the NGOs - Legal entities established
as non-governmental
organizations are exempt from profit tax up to the amount of
Euro 4,000, if they use this profit in order to attain the objectives
for which they have been established.
The exemption is established by the decision of the competent
tax authority.
Avoiding double taxation - Resident taxpayer who makes
profit outside of Montenegro and pays tax on such profit in another
state is granted a tax credit amounting to the profit tax paid in
that country. The tax credit is limited to the amount of tax that
would be paid according to applicable tax rate in Montenegro
Calculation and payment of profit tax - Tax period for which
the profit tax is calculated covers fiscal year (calendar year, except for
in case of liquidation or start-up of activities in the course of a year).
* Until 2005 two tax rates were applied. Tax rate amounted to 15% for profit up to 100.000 eur; tax rate amounted to 20% for profit over 100.000 eur
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Profit tax is calculated following expiration of a fiscal year or
another tax period, according to the tax base realized in that period.
Taxpayer pays profit tax in the course of a year by paying
monthly tax advances, the amount of which is determined on the
basis of profit tax return for previous year.
Tax advances is payable by the end of the current month for a
previous month to the amount of 1/12 of a tax liability for preceding
year.
Tax return - Profit taxpayer is obliged to file tax return to the
competent tax authority for the period for which the profit tax is
calculated. The tax return is filed within three months at the latest
from expiration of the period for which the tax is calculated. The
tax calculated in the tax return shall be paid within the same period.
of amount of Revenues exempt from Personal Income Tax (Official
Gazette of RM, No. 1/06), defines several types of revenues which
are exempt from personal income tax (meal allowances, per diems
for business travels, jubilee awards etc.)
Tax base - Personal income tax base includes a taxable income.
The taxable income is a difference between income and recognized
expenditures (costs) incurred by the taxpayer with respect to such
income earning and maintaining.
Tax rates - Annual personal income tax is computed by using
the following tax scale:
5. PERSONAL INCOME TAX
Personal income tax liability has been introduced by the Law
on Personal Income Tax ("Official Gazette of RM", No.65/01 and
37/04) effective from 1 July 2002, and by regulations stemming
from the said Law. The Law was amended in 2004 with respect to
tax rates and tax relieves.
Taxpayer - Personal income taxpayer is a resident or non-resident
natural person who earned income from sources determined
under the Law. When two or more natural persons jointly earn income,
a taxpayer is any of these persons in proportion with the share
in such income.
The following persons are exempt from paying income
tax:
- Staff members of foreign diplomatic missions in Montenegro
and members of their households, if they are not citizens of Montenegro;
- Staff members of foreign consular offices and members of
their households, if they are not citizens of Montenegro;
- Officers and experts of the UN technical assistance programs
and their specialized agencies;
- Honorary consuls of foreign states, but only for the income received
from the state that appointed them to that position
- Officers, experts and staff of other international organizations,
if they are not citizens of Montenegro or if they not reside in
Montenegro;
Revenues are not considered to be personal income if received
on the following basis: Assistance in the event of destruction
or damage to property due to natural disasters and other extraordinary
events; Compensation under health insurance, except
for compensation of salaries; Inheritance and gifts; Games of chance
and prize competitions; Objects, life and property insurance; Organized
social and humanitarian aids; Scholarships and students
credits; Pension severance payments.
In addition to the above revenues, the Decree on Determination
Sources of Income - Personal income tax is paid on revenues
earned on the basis of: personal earnings; independent activities;
property and property rights; capital and capital gain.
Personal income taxation - Personal income means an income
that a taxpayer earned on the basis of employment and earnings
defined under the employment. Taxable income from personal income
includes gross earnings.
Personal income tax is calculated, withheld and paid by employer
or payer of such earnings, every time such earnings are disbursed,
using a monthly tax scale:
Taxation of independent activities - Income from independent
activities includes an income earned from: commercial activities,
freelance professions, professional and intellectual services
and other independent activities other than main activity of a taxpayer,
which are performed from time to time for profit earning.
Taxable income from independent activities is a taxable profit of
the taxpayer.
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Tax advances on income from independent activities are paid
monthly to the amount of 1/12 of the tax liability under the annual
tax return for preceding year.
Tax advance which is paid on this account shall be deemed a tax
credit with respect to tax liability under the tax return.
Taxpayers who earn income from intermittent independent activities
shall be recognized standard expenses to the amount of 35%
of earned income (if their real expenses are not documented), while
the tax rate is 20%.
Lump sum taxation of income from independent activities
- A taxpayer, whose total turnover in a year preceding the year
for which the tax is determined (or whose expected turnover in the
moment of start-up of activities) is less than Euro 18.000 can be allowed
to pay the annual lump sum tax.
The Rulebook on Lump Sum Taxation of Income from Independent
Activities regulates in detail the lump sum taxation, and the
taxpayers are classified in 4 groups depending on the type of their
activity, while each group is classified into 4 subgroups depending
on the amount of achieved turnover.
Taxation of Property and Property Rights- Income from property
and property rights includes revenues earned on the basis
of: renting of movable and immovable property; time-bound cession
of copyrights, industrial property rights and other rights.
Tax base (taxable income) for payment of the tax on income
from property and property rights includes a difference between
total income earned from renting of movable and immovable property,
copyrights and industrial property rights and total expenses
incurred with respect to earning such income in the same tax period.
Expenses incurred on the basis of property and property rights
include real expenses incurred with respect to earning such income
(if they are documented) or standard expenses to the amount of
35% of the income earned from property and property rights, except
for income from renting of rooms, apartments and houses for
holiday to travelers and tourists, where standard expenses amount
to 50% of the income earned.
Tax advance on income from property and property rights is calculated,
deducted and paid in the course of the year by a payer of
related receipts (legal person or entrepreneur), or a taxpayer (in case
of direct income earning) concurrently with collection of such
receipts by applying the tax rate of 20% on the taxable income.
Taxation of income from capital -Income from capital includes
revenues on the basis of: interests; shares in profit earned by
members of management board or employees in cash or in shares;
use of property or services by capital owners or co-owners for their
private purposes.
Payer of income from capital is obliged to calculate, withhold
and pay a tax on income from capital concurrently with payment
of revenues at the rate of 15%, except for income from interests made
by non-residents (tax rate is 5%).
Taxation of income from capital gains - Capital gain includes
income from sale of a real estate or share in the legal persons'
property and securities (assets) if the sale is performed within 2
years from the day of acquisition of such assets.
Taxable income from capital gain is a difference between sale
and acquisition price of the assets, adjusted by increase of retail prices
from the day of acquisition to the day of sale of such assets.
A resident pays the tax concurrently with filing of the annual
tax return, while the taxable income from capital gain is included
in the tax base to the amount of 50%.
Tax on capital gains earned by a non-resident is paid at the source
at the rate of 15%.
Filing of Annual Tax Return - Personal income taxpayer is
obliged to file annual tax return to the competent tax authority
upon expiration of a fiscal year by end April of the current year for
a preceding year.
The taxpayer calculates personal income tax by himself in the
tax return, by applying progressive tax rates on the tax base, while
the total tax so calculated is reduced by the tax advances paid at
sources.
If, by paying the tax advances, a taxpayer overpaid the tax under
the tax return, the amount of overpaid tax is refunded to him
at his personal request or is included in a tax advance for the next
tax period.
Persons exempt from filing of annual tax return - Annual
tax return is not filed by a taxpayer for income earned on the basis
of: personal income stemming from employees' wages, if such income
is earned with one employer in the same accounting period; income
from other independent activities other than main activity of
the taxpayer; income from capital; income from independent activities
taxed at the flat-rate, where the tax advances paid are deemed
to be finally determined tax on that account.
6. CONTRIBUTIONS FOR COMPULSORY
SOCIAL INSURANCE
Payment of contributions for compulsory social insurance is regulated
by the following laws: Law on Pension and Disability Insurance
(Official Gazette of RM, No. 54/03, 39/04 and 79/04), effective
from 1 January 2004, Law on Health Insurance (Official
Gazette of RM, No. 39/04) effective from 10 June 2004, and Law
on Social Insurance Contributions (Official Gazette of RM, No.
23/93 and 45/98), the section relating to unemployment insurance
contributions, while its underlying solutions have been in force
since 1993.
The above Laws govern all issues relating to payment of contributions
for respective types of compulsory social insurance (insured,
payer, base, rate, manner of payment etc.). Main principle is
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that these contributions for compulsory social insurance are paid
by the employee (the insured) and employer.
Gross personal income is a base for calculation of the contributions,
which implies net personal income (wage), tax and contributions
paid by the employee out of such income.
Contribution rates on Personal Income of Employees (wages
etc.) are as follows:
Contributions paid by entrepreneurs - Entrepreneurs (insured
persons in the framework of independent activities) pay contributions
for compulsory social insurance at the following rates: for
pension and disability insurance 21.6%; for health insurance 13.5%,
and for unemployment insurance 1%.
Taxable income from independent activities (net income) is a
base for payment of these contributions, which may not be less
than average wage in the Republic for a month for which the contribution
is paid.
Contribution limits -The Law on Pension and Disability Insurance
sets maximum annual base for payment of contributions for
pension and disability insurance, which is 18.070 eur for 2006.
7. REAL ESTATE TRANSFER TAX
Real estate transfer tax liability (only used, not a new real estate)
has been introduced by the Law on Real Estate Transfer Tax
("Official Gazette of RM", No. 69/03), effective from the beginning
of 2004. The real estate transfer tax rate amounts to 2% of the market
value of a real estate (on a newly constructed real estate transfer,
the VAT is paid at the rate of 17%).
Governmental agencies, local self-government units and international
organizations are exempt from the tax. Real estate transfer
tax is not paid by natural persons who solve their housing problems
by acquiring such real estate, however not exceeding 20m2 per a
member of the household. Real estate transfer tax is not paid by natural
persons.
8. SALES TAX ON USED
MOTOR VEHICLES,
VESSELS AND AIRCRAFT
Sales tax on used motor vehicles, vessels and aircraft is regulated
by the Law on Used Motor Vehicles, Vessels and Aircraft
Sales Tax ("Official Gazette of RM", No. 55/03), effective from October
2003.
The taxpayer is a purchaser or acquirer of the used motor vehicle,
vessel or aircraft, provided that the VAT is not paid on sale of the
same. Tax rate amounts to 5% of the market value of the above products.
Tax exemptions are highly reduced and are related to inheritance
and gifts in the first order of succession.
9. TAX ON USE OF PASSENGER
MOTOR VEHICLES,
VESSELS AND AIRCRAFT
Tax on use of passenger motor vehicles, vessels and aircraft liability
has been introduced by the Law on Tax on Use of Passenger
Motor Vehicles, Vessels and Aircraft ("Official Gazette of
RM", No. 28/04 and 37/04), effective from early May 2004. The tax
rate on motor vehicles ranges from 15 to 150 eur (tax liability is reduced
by 5% for each year of service life of a vehicle, however not
more than 70%), for motorcycles from 10 to 200 eur, for boats and
yachts from 5 to 400 eur and for aircraft from 1.000 to 5.000 eur.
10. INSURANCE
PREMIUM TAX
This tax is paid by insurance companies irrespective of whether
they are performing the insurance operations personally or through
their agents. The tax rate is 6% on auto liability insurance premiums,
and 3% on Casco insurance of motor vehicles. The tax liability
is payable by the 10th day in a month for preceding month.
Insurance premium tax liability has been introduced by the Law
on Insurance Premium Tax ("Official Gazette of RM", No. 27/04
and 37/04), effective from early May 2004.
12. REPUBLIC STAMP DUTIES
(ADMINISTRATIVE FEES AND DUTIES,
COURT FEES, REGISTRATION FEES)
Administrative fees and duties payment liability is stipulated
under the Law on Administrative Fees and Duties ("Official Gazette
of RM", No. 55/03 and 81/05). Amount of the republic stamp
duties is determined under the stamp duty tariff, depending on nature
of action or document for which the stamp duty is payable.
Court fees payment liability is stipulated under the Law on Court
Fees ("Official Gazette of RM", No. 76/05). The court fee is payable
for actions and documents, undertaken in the court procedure.
The amount of a court fee is determined under the stamp duty
tariff and depends on complexity of an action under the court proceedings.
The amount of stamp duty liability depends on nature of
the court proceedings.
Registration fees - Registration fees payment liability is stipulated
under the Law on Business Companies ("Official Gazette of
RM", No. 6/02). These fees are paid at the moment of registration
of business companies with the Commercial Court. The amount of
the registration fee is from 1 - 50 eur depending on nature of an activity
or type of a company which is to be registered.
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13. CONCESSION CHARGES
The concession charges are paid for use of natural resources of
common interest and exercising public authorizations, i.e. charges
for use of: forests; mineral resources; public roads; coastal zone; environment
related charges; organization of games of chance. Payment
of the above charges is regulated by a special legislation (Law
on Forests; Law on Waters; Law on Mining Industry; Law on Coastal
Zone; Law on Games of Chance, etc).
14. LOCAL TAXES
The municipalities, pursuant to powers vested in them under
the Law on Financing of Local Self-Government ("Official Gazette
of RM", No. 42/03 and 44/03) and according to relevant tax
laws, may earn revenues on the basis of:
- Local revenues (property tax, surtax on personal income tax,
consumption tax, firm or trade name tax, tax on undeveloped building
land;
- Local fees (tourist tax, administrative fees and duties and municipal
tax), and
- Charges (charges for development of building land, charges
for use of building land).
Property tax - Property taxation is performed in accordance
with the Property Tax Law ("Official Gazette of RM", No. 65/01),
which was adopted at the end of 2001, and has been in force from
January 2003, and by the Decree on Detailed Criteria and Methodology
for Determination of Market Value of a Property
("Official Gazette of RM", No. 23/03, 26/04 and 31/05). The tax rate
ranges from 0,08% to 0,80% of a property market value, while its
amount is determined by a municipality, according to its own specific
characteristics.
Surtax on Personal Income Tax -The tax is levied by a local
self-government by its own regulation stemming from the Law on
Financing of Local Self-Government. The surtax rate may be up to
13% for municipalities and up to 15% for the Capital and Old Royal
Capital, of a tax base which includes personal income tax.
Consumption tax - The tax is levied by a local self-government
by its own regulation stemming form the Law on Financing of Local
Self-Government. The consumption tax is charged on sale of alcoholic
and non-alcoholic beverages in catering facilities.
The tax rate ranges up to 3% for municipalities or 5% for the Capital
and Old Royal Capital. The taxpayer is a legal or natural person
rendering catering services. The consumption tax rate includes
sales price of a beverage excluding VAT and sales tax.
persons who are personal income taxpayers or corporate income
taxpayers and who are registered for performing business activities.
The tax is paid in annual amount which is determined by a local
self-government, but not exceeding the amount of 300 eur per
a firm or trade name.
Tax on gambling and entertainment games - The tax is levied
by a local self-government by its own regulation based on the
Law on Financing of Local Self-Government and a separate legislation
. The separate legislations govern basic elements (taxpayer,
tax base etc.), while the amount and manner of calculation and
payment of such tax is determined by a local self-government under
its enactment.
Tourist tax - Tourist tax liability is regulated by the Law on
Tourist Tax ("Official Gazette of RM", No.11/04 and 13/04).The
amount of the tourist tax ranges from 0,10 eur to 0,80 eur, depending
on a type of accommodation facility, favourable conditions
and available services.
The taxpayer is a person who uses accommodation services in a
tourist or catering facility outside his place of residence.
Administrative fees and duties - Administrative fees and duties
liability is regulated under the Law on Administrative Fees
and Duties ("Official Gazette of RM", 55/03 and 81/05), and by
municipal regulations. The taxpayer is a person at whose request a
procedure is instituted or an action is undertaken, for which the local
administrative fees and duties are payable according to the
stamp duty tariff.
The amount of administrative fees and duties may not exceed
the amount of a stamp duty payable for similar documents or actions
instituted before the republic administration authorities.
Municipal taxes *- The taxes are regulated by the Law on Municipal
Taxes and Charges ("Official Gazette of RM", No.38/92,
30/93, 3/94, 27/94 and 45/98). The Law sets forth types of rights,
objects and services on which municipal taxes may be levied by a
local self-government. The municipal tax is paid by a user of right,
object or services, the use of which is subject to municipal tax liability.
Local charges - Local charges liability is regulated by the Law
on Building Land ("Official Gazette of RM", No.55/00) and by
Law on Roads ("Official Gazette of RM", No. 42/04). The Law requires
payment of charges for development and use of urban building
land.
Firm or trade name tax - The taxpayers are legal or natural
* Draft Law on Gambling and Entertainment Games is under the Parliamentary procedure.
* New draft Law on Local Municipal Taxes is under the Parliamentary procedure.
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Budget suficit
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Budget suficit
The entire work of the Tax Administration and all of its segments,
i.e. Sectors and Territorial Units is reflected in the final
collection of taxes, contributions and other public revenues.
We, in the Tax Administration, recognize cooperation with the
taxpayers and voluntary compliance with the tax regulations, what is
realized through the self-taxation principle. The self-taxation principle
is accepted also in our tax legislation and represents a reflection
of modern world trends in fiscal systems. It enables the taxpayer to
file a tax return and calculate by itself the tax obligations for payments
to be effected in compliance with the terms regulated by law.
Pursuant to this pursuit, gross collection of taxes, contributions
and other budgetary revenues was realized in 2005 to the amount of
521.730.273eur.
Taking into account that return of tax credits, several contributions
paid, mistaken payments etc. are effected from the total realized
collection, the net collection, following the determined returns
reduction for 2005, amounts to 485.915.232eur.
Therefore, aggregate gross collection was reduced by the amounts of
VAT returns, i.e. by the amount of 35.815.041eur ( VAT 33.880.138 eur).
In order to review the collection trend in the reporting period
we did comparative analysis in relation to the collection realized
in 2004
Index of total collection growth in relation to the comparative
period of the last year amounted to 116, what accounts for the
increase in collection by 16% (tax collection was higher by 15% and
contributions collection by 18%).
Nominal values and tax and contributions growth show that:
• Collection of taxes in the period January - December, 2005
amounted to 308.907.000eur, and for the same period in 2004 it
amounted to 268.436.000eur, what is by 15% higher,
• Collection of contributions in the period January - December
2005 amounted to 212.823.000eur, and for the same period of the
last year it amounted to 179.939.000eur, what is by 18% higher.
Income Tax collection was realized to the amount of
90.075.000eur . In relation to the comparative period in 2004, collection
of these revenues was higher by 3%. (In 2004, these revenues were
collected to the amount of 87.042.000eur).
Mirjana Pešalj
In the structure of Income Tax collection, which was realized in
the period from January to December, 2005, the Personal Income Tax
collection makes 97% and amounts to 87.018.000eur. In relation to
the comparative period, collection of this tax was higher by 7%. Such
growth is conditioned by enhanced measures of collection, in the
course of the whole year. The amount of 15.613.000eur was collected
by the application of these measures. Growth of the Personal Income
Tax collection was realized apart from the fact that physical persons
tax rate was reduced by 10%.
Collection of the Independent Activity Income Tax, in the structure
of Income Tax collection, makes 2% and amounts to 1.892.000 eur.
Independent Activity Income taxpayers are in most cases "small taxpayers;,
who are provided with a special treatment in the course of arrears
payment, by the Decree on collection of due and unpaid taxes
and contributions and other public revenues.Tax arrears of taxi drivers,
autotransporters and market-place sellers was"frozen,,.Therefore,
only very small amounts of debt remained to be collected, collection
of which could not contribute to the higher amount of collected income
tax.
Profit tax was collected to the amount of 23.485.000 eur, what was
by 24% higher in relation to the comparative period in 2004 ( index
124 ).This was the result of Profit Tax collection in accordance with tax
returns (64%) and measures taken for the purpose of collection (36%).
The collected amount of VAT (domestic market) in the period January
- December 2005 was 94.729.000 eur, what is by 37% higher in
relation to the comparative period (index 137). These revenues were
generated to the amount of 31.626.000eur by measures taken for the
purpose of collection ( 33% out of the total amount of collected VAT).
Revenues from excises, in relation to the comparative period were
higher by 2%. Revenues on the basis of excises on mineral oils, mineral
oil products and substitutes, in the reporting period, were generated
to the amount of 59.769.000eur, what makes 83,2 % revenues collected
on excise taxes. In relation to the comparative period in 2004,
these revenues were higher by 1,7 % .Revenues on the basis of excise
on alcohol and alcoholic beverage in production were generated to
the amount of 6.079.000eur, what was 8,5% out of the total collected
revenues from excise tax. In relation to the comparative period in
18

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BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
2004, these revenues are higher by 40,6%. Revenues on the basis of excise
on tobacco products in production were generated to the amount
of 5.966.00eur, what was 8,3% out of the total revenues collected
from excise tax. In relation to the same period in 2004, these revenues
were lower by 21,7%. Excise on goods imported is the category, which
is not under the competence of the Tax Administration.
Fees for usage of natural resources of general interest were collected
to the amount of 14.857.000 eur, what was by 123% higher in relation
to the comparative period (index 223). These revenues were collected
to the amount of 3.513.000 eur. by the measures taken for the
purpose of collection.
Category of the tax on goods and services turnover was cancelled
by the application of the Value Added Tax. Collection realized in relation
to the tax on turnover of used motor vehicles, vessels, airplanes
and aircrafts was to the amount of 3.055.000 eur, collection of tax on
insurance premiums was to the amount of 1.051.000 eur and it could
not be compared to this type of collection in the previous year because
on May 6, 2004 started application of the Law on Premium Insurance
Tax, which stipulated the obligation to calculate and pay for
this tax.
Collected amount of the Real EstateTax was 5.148.000 eur.
Tax on Real Estate Transfer is such type of tax which can not be
influenced by the collection measures, apart from delinquent debt,
because the taxpayer itself decides upon its property and its transfer.
Therefore, comparison of collection of this tax in the reporting period
to collection from the comparative period is not real.
In relation to the comparative period, collection of pension and
invalidity insurance was higher by 20 %, contributions for healthcare
insurance by 15 % and contributions for unemployment insurance
by 27 %.
Collection of taxes on the level of Tax Administration and territorial
units, in relation to the comparative period are presented in tables
and graphics.
in 000 eur
TAXES PU PG NK BR
Realized 2004. 268.436 138.669 30.546 8.881
Realized 2005. 308.907 140.316 43.387 10.863
Index 115 101 142 122
TAXES BD HN BP BA PV
Realized 2004. 11.396 70.051 2.768 2.748 3.377
Realized 2005. 18.898 76.919 4.482 4.348 8.168
Index 166 110 162 158 242
Collection of contributions on the level of the Tax Administration
and in the territorial units, in comparison to 2004, presented in
tables and graphics. in 000 eur
CONTRIBUTIONS PU PG NK BR
Realized 2004. 268.436 138.669 30.546 8.881
Realized 2005. 308.907 140.316 43.387 10.863
Index 115 101 142 122
CONTRIBUTIONS BD HN BP BA PV
Realized 2004. 11.396 70.051 2.768 2.748 3.377
Realized 2005. 18.898 76.919 4.482 4.348 8.168
Index 166 110 162 158 242
CONTRIBUTIONS COLLECTED IN THE TERRITORIAL UNITS
IN 2005
in 000eur
TAXES COLLECTED IN THE TERRITORIAL UNITS IN 2005
in 000eur
Explanation: ( TA - Tax Administration, PG - Podgorica, NK -
Nikšić, BR - Bar, BD - Budva, HN - Herceg Novi, BP - Bijelo Polje, BA -
Berane, PV - Pljevlja ).
Explanation: ( TA - Tax Administration, PG - Podgorica, NK -
Nikšić, BR - Bar, BD - Budva, HN - Herceg Novi, BP - Bijelo Polje, BA -
Berane, PV - Pljevlja )
Tax Administration undertook activities to collect the tax arrears
during 2005. The tax arrears were collected to the amount of
107.032.000eur, i.e. taxes to the amount of 66.630.000eur, and
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Budget suficit
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
contributions to the amount of 40.402.000eur .
In addition, in the period from January to December 2005 the
Tax Administration reported to the Commercial Court claims for public
revenues against 49 economic entities, which were in the bankruptcy
procedure, to the amount of 3.589.361eur.
TREND OF REALIZATION OF COLLECTION IN 2006
In the course of January and February 2006, thanks to the efficiency
of the Tax Administration officers, the collection growth
trend continued. Therefore, Personal Income Tax collection was
realized to the amount of 14.260.000 eur. In comaprison to January
and February 2005, collection of these revenues was higher
by 67.09% (when it was collected to the amount of
8.534.000eur).
Collection of Independent Activity Income Tax for I and
II/2006 was realized to the amount of 220.000 eur. In comparison
to the same period in 2005, collection of these revenes was higher
by 7,84%. (for I and II 2005 it was collected to the amount of
204.000eur) .
Collection of Property Income Tax was realized to the amount of
184.000 eur. In comparison to the same period in 2005, collection of
these revenues was higher by 85,85% (for I and II 2005 it was collected
to the amount of 99.000eur).
Collection of Profit Tax was realized to the amount of 2.197.000
eur. In comaprison to the same period in 2005, collection of these revenues
was higher by 23,84%. In the comparative period,
1.774.000eur of these revenues was collected.
Collection of Value Added Tax was realized to the amount of
20.819.000 eur. In comparison to the same period in 2005, collection
of these revenues was higher by 26,28%. (for I and II 2005 it was collected
to the amount of 16.486.000eur) .
Collection of Turnover Tax was realized to the amount of 711.000
eur. In comparison to the comparative period in 2005, collection of
these revenues was higher by 53,89%. In the comparative period these
revenues were collected to the amount of 462.000eur .
Collection of Excise Tax, was realized to the amount of
9.280.000eur. In comparison to the comparative period in 2005,
collection of these revenues was higher by 5,89% (for I and II
2005 these revenues were collected to the amount of
8.763.000eur).
Collection of Real Estate Transfer Tax was realized to the amount
of 905.000eur. In comparison to the comparative period in
2005, collection of these revenues was higher by 86,21%. In the
comparative period these revenues were collected to the amount of
486.000eur.
Collection of revenues on the basis of concessions was realized to
the amount of 1.208.000 eur. In comparison to the same period in
2005, collection of these revenues was higher by 23% (for I and II
2005 it was collected to the amount of 976.000eur ).
Therefore, gross tax collection for the first two months in 2006
was realized to the amount of 49.784.000 eur. In comparison to the
same period in 2005, the realized collection was higher by 31%, when
it was collected to the amount of 37.784.000eur.
Collection of revenues on the basis of contributions for the first
two months in 2006 was realized to the amount of 28.295.000 eur.
In comparison to the same period in 2005, collection of these revenues
was higher by 38%. (for I and II 2005 it was collected to the
amount of 20.372.000eur).
GROSS COLLECTION - REALIZATION JAN-FEB 2005 AND
REALIZATION JAN-FEB 2006
in 000eur
PLP PPSD PPI PD PDV
OstvarenoI-II 05. 8.534 204 99 1.774 16.486
OstvarenoI-II 06. 14.260 220 184 2.197 20.819
Index 167,09 107,84 185,85 123,84 126,28
PP A K PN D
OstvarenoI-II 05. 462 8.763 976 486 20.372
OstvarenoI-II 06. 711 9.280 1.208 905 28.295
Index 153,89 105,89 123,77 186,21 138,89
Explanation: (PIT - Personal Income Tax, IAIT - Independent Activity
Income Tax, TPI - Tax on Property Income, PT - Profit Tax, VAT -
Value Added Tax, TT - Turnover Tax, E - Excise, RET - porez na nepokretnost,
C - Contributions).
In the Tax Administration - Sector for implementation of collection
operates Centralized Collection Center, which activities are directed
towards a faster and more efficient due diligence on delinquent
taxpayers and accounts as well as notifying the taxpayers about
the tax due on the basis of: Profit Tax, Value Added Tax and Fees on
the basis of usage of natural resources (concessions) as well as notifying
the taxpayers, who did not comply with the payment dynamics
envisaged by the Agreement on Tax Obligations Restructuring. Apart
from that, the taxpayers are kept informed if they fail to file tax returns
in due time.
Delinquent taxpayers are registered on the basis of report from
the Tax Administration information system. Registration includes
individual "processing" of all taxpayers from the list. Procedure of
''Processing'' implies that before contact with the taxpayers, officers
provide for all necessary data (analysis of analytical cards according
to all types of taxes and contributions) on the taxpayers debt status.
In the everyday work activities, the Tax Administration makes
efforts to recognize the fiscal system, in which the taxpayers will
comply with the tax laws and file their tax returns in due time. However,
there is still certain number of taxpayers, who do not file
their tax returns, in this tax system development phase. Therefore,
they do not settle their debts in the prescribed terms. The tax authority
is then obliged to take action in order to provide for delinquent
tax returns.
Providing for delinquent tax returns is done by notifying the taxpayer
that he failed to file a tax return (through phone, written notification
and in certain cases by means of personal delivery).
During 2005 on average, 8.882 VAT returns were filed monthly
(106.587/12 =8.882), i.e. 79% of the average number of taxpayers registered
for VAT ( 135.364/12=11.280).
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BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
During 2005 on average, 100 excise returns were filed monthly
(1.204/12 = 100), i.e.79% of the average number of registered excise
taxpayers (1.528/ 12=127).
Problem faced by the Tax Administration with continuity in the
procedure of providing for delinquent returns, represented in the
graphic for the territorial unit Budva, is that certain number of taxpayers
deems they are not obliged to file tax returns in the periods
when they do not do business. In that way they neglect the legal obligation
to file tax return with zero tax amount.
Growth trend of the VAT and Excise tax returns filed is presented
through comparative data of the last month in the reporting period
for 2005 -November '05 and the first month in the reporting period
for 2006 - December '05.
Monthly returns are to be filed until 15th in the month for the
previous month. For that reason annual report on returns begins
with December of the previous year and ends with November of the
current year.
Type Last month in the First month in the index
of filed reporting period for reporting period
tax return 2005 2006
-November 2005 - December 2005.
VAT 11.808 11.976 101,42
EXCISES 137 141 102,92
On the basis of the given data we can state that one of the priority
tasks of the Tax Administration is to take action in order to provide
for delinquent tax returns.
Tax Administration territorial units implement with continuity
measures in order to provide for monthly delinquent tax returns
(VAT and Excises). Their effect can not be seen straight away, in particular
due to the relatively short term, i.e. monthly term to take these
measures. Hovewer, the growth tendency in the number of taxpayers,
who comply with tax regulations, i.e. "volunatarily" file tax returns,
is encouraging and represents a stimulus for work in the territorial
units of the Tax Administration.
Primary task of the Tax Administration is to take measures to
provide for delinquent tax returns, having in mind that the taxpayer,
who fails to file tax return, is a potential delinquent taxpayer, i.e "defaulter".
Successful coordination of the sectors of Head Office and territorial
units brings about realization of the everyday basic working task
and strategic goal of the Tax Administration:
• o efficient and effective implementation of public revenues
collection
Director, Tax Administration
MIRJANA PEŠALJ
21

Tax administration
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Tax administration
Introduction
The Tax Administration was established by the Decree of the Government of the Republic of Montenegro of August 2003, instead
of the previous Public Revenues Directorate, as an authority whose primary function is collection of public revenues and ensuring
regular inflow of the Republic Budgetary funds.
Taking into account importance of the activities that are under its immediate competence, the Tax Administration has inter alia
paid special attention to improvement of its organization and professional and personnel consolidation over the last year and a
half. To this end, observing the legally binding requirement concerning downsizing of the public administration employees, the
Government of the Republic of Montenegro adopted in December 2004 a new enactment on systematization and reorganization
of work posts.
The Tax Administration currently has 626 full-time permanent employees, about 30 employees in temporary employment or
with whom temporary working contracts are concluded and 31 trainees with university degree.
DIRECTOR
SECTOR FOR PAYMENT
ENFORCEMENT
INTERNAL CONTROL
DEPARTMENT
BAR
BUDVA
ULCINJ
TIVAT
TAX PAYERS SERVICE AND
REGISTRATION SECTOR
CONTROL AND
COLLECTION
EFFECTS MONITORING
DEPRATMENT
HERCEG NOVI
NIKŠIĆ
KOTOR
ŠAVNIK
PLUŽINE
SECTOR FOR TAX
REGULATIONS
MONITORING AND INSPEC-
TION CONTROL
PERSONNEL, TECHNICAL
AND ADMINISTRATIVE
SERVICE
PODGORICA
DANILOVGRAD
CETINJE
SECTOR FOR TAX RETURN
RECEPTION AND PROCES-
SING,
INCOME ACCOUNTING
AND IS
ECONOMIC AND
FINANCIAL
AFFAIRS SERVICE
BIJELO POLJE
MOJKOVAC
KOLAŠIN
ANDRIJEVICA
BERANE
PLAV
ROŽAJE
PLJEVLJA
ŽABLJAK
22

Tax administration
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
The above employees work in the Head Office and eight
Branch Offices: Podgorica, with Branches in Cetinje and Danilovgrad,
Nikšić, with Branches in Plužine and Šavnik, Budva,
with Branch in Tivat, Herceg Novi, with Branch in Kotor, Bar,
with Branch in Ulcinj, Bijelo Polje, with Branches in Mojkovac
and Kolašin, Berane with Branches in Andrijevica, Plav and Rožaje
and Pljevlja, with Branch in Žabljak.
Functional organization of the Tax Administration Head Office
is composed of: four Sectors- Sector for Registration and
Taxpayers Services, Sector for Tax Return Reception and Processing,
Income Accounting and Information System, Sector for Tax
Regulations Implementation Monitoring, Inspection Supervision
and Administrative Procedure and Sector for Payment Enforcement;
two Departments- Department for Control and Collection
Effects Monitoring and Human Resources Development
and Department for Internal Control; and two Services: Personnel,
Legal, Technical and Administrative Service and Economic
and Financial Affairs Service.
The Tax Administration is headed by the Director, while the
Management Team, composed of Assistant Directors, who are
also Chiefs of Sectors, Departments and Services or Branch Office
Executives, helps the Director in the process of management
and discharging of the duties.
Competence, efficiency, professionalism and transparency
are the main principles which have been consistently followed
by this Administration, both in performing regular activities and
tasks and in relation with taxpayers, citizens and the public in
general.
Efficient collection has been a strategic aim of the Tax Administration,
which also implies efficient control of the taxpayers.
Offering fast and high-quality services to the taxpayers and citizens
and prompt recording of identified liabilities arising from
the public revenues are prerequisites for successful realization of
the said activities.
Results achieved by the Tax Administration last year and early
this year in all areas of its operations and competences, which
were reflected in exceptional collection of source budgetary revenues
and budgetary surplus, speak in favour of successful
functioning and coordination of the above organizational segments.
Important fact is that the automatic data processing has
been in place in the Administration, while the Information System
covering all municipalities in the territory of Montenegro
has a direct connection with the Central Bank of Montenegro
through «mip-net» network. The Tax Administration thus provides
accurate and precise data and information both for its own
purposes and for the Ministry of Finance and other governmental
agencies and institutions. Since last year, the Tax Administration
Information System has been actively applying “Revenue
Gordana Stajčić
Model” and ”Manual Order” Project, while another important
and complex model- “Consolidated Collection” is expected to be
implemented in the course of this year.
Special attention within the Tax Administration has been
paid to education of both its employees and the taxpayers. In
addition to training courses organized jointly with foreign consulting
firms, the Tax Administration also organizes training
courses by itself, through highly successful lectures, seminars
and presentations.
Since September 2003, the Tax Administration has been a
member of the Intra-European Organization of Tax Administrations
(IOTA), in the framework of which its representatives have
active participation through area-groups. One of the most frequent
topics discussed in the workshops, which is of paramount
importance for our tax system is “VAT Frauds and Money Laundering”.
In the course of last year, the Tax Administration concluded
agreements on co-operation with the Union of Employers and
Montenegro Business Alliance in order to establish as good
communication with the taxpayers as possible and to improve
the tax discipline and compliance with legal regulations in the
area of tax policy through joint activities and conformity with
legal regulations.
In order to provide education and training of young staff,
the Tax Administration also signed Agreements on Co-operation
with the Faculties of Economics and Law of the University of
Montenegro.
Chief of the cabinet
GORDANA STAJČIĆ
23

Public debt
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Report on public debt
of Montenegro
as of 31 December 2005
1. AMOUNT AND STRUCTURE
OF PUBLIC DEBT OF
MONTENEGRO
Public debt of Montenegro amounted to
EUR 700,4 million as of 31 December 2005.
Domestic debt amounted to EUR187,1 million
or 26,7% of total debt, while foreign debt
amounted to EUR 513,3 million or 73,3% respectively.
It is primarily due to ongoing negotiations
and allocation of debt , ongoing
negotiations on succession of the former
SFRY and impossibility to quantify explicit liabilities
assumed under the Law on Restitution
of Expropriated Property Rights and
Compensation that this amount has not
been fully clear-cut. According to current estimations,
no great divergences are likely to
arise following conclusion of negotiations on
allocation of the financial assets and liabilities
with the Republic of Serbia.
Table 1. Amount and structure of public
debt of Montenegro in the period from
2002-2005.
Source: Ministry of Finance
In 2002, public debt amounted over
EUR 1 billion. It is amount which was determined
prior to debt rescheduling with the
International Bank for Reconstruction and
Development and Paris Club creditors and
prior to final agreement with Serbia concerning
liabilities to the London Club creditors.
The largest portion of the public debt
of Montenegro is related to inherited longterm
liabilities of the old system (ex SFRY
and FRY). This portion particularly relates
to foreign debts assumed by the Law on
Regulation of Liabilities and Claims arising
out of Foreign Debt and Foreign Savings of
Citizens, which, at the end of 2005, amounted
to EUR 435,5 million or 62,5% of
the public debt, i.e. mostly loans extended
by the International Bank for Reconstruction
and Development and Paris Club creditors.
Namely, except for credit arrangements
with the international financial organizations
(IMF, IBRD etc.) and intergovernmental
credit arrangements of the
SFRY, major portion of foreign debt contracted
by banks and enterprises, was their
commercial debt which was not guaranteed
by the SFRY and National Bank of Yugoslavia
(NBY). Starting from 1983 when
SFRY, due to lack of foreign currency,
accepted the process of multilateral rescheduling
and refinancing of its foreign debt
liabilities, the total foreign debt (including
new foreign loans which were then being
contracted) has been guaranteed by the
SFRY and NBY, becoming thus a potential
public debt. This debt includes allocated
debt payable by beneficiaries of foreign
loans from the Republic of Montenegro
and a portion (5,88%) of non-allocated
debt contracted or guaranteed by ex SFRY,
or assumed by FRY (36,52% of non-allocated
debt of the SFRY).
In addition to old foreign debts, the
"inherited" public debt also covers liabilities
arising out of old foreign currency savings,
which were assumed under the said
Law. The liabilities arising out of old foreign
currency savings amounted to: EUR
127 million at the end of 2003; EUR 123
million at the end of 2004 and EUR 117
million at the end of 2005, which accounts
for 16,8% of the public debt. Therefore, at
the end of 2005, inherited long-term liabilities
from the old system account for
79,3% of the total public debt of Montenegro.
Remaining portion of 20,7% includes:
new debts contracted in the period
from 2000-2005; liabilities arising out of
short-term loans; credits; T-bills; debt contracted
by local self-governments and outstanding
budgetary liabilities.
2. EXTERNAL PUBLIC DEBT
External public debt amounted to EUR
513,3 million., out of which "old" debt accounted
for EUR 435,5 million or 84,9%,
and new one amounts to EUR 77,9 million
or 15,1%. The debt was reduced by about
50% at the end of 2002, when negotiations
were concluded with major creditors- the
International Bank for Reconstruction and
Development, Paris Club creditors and Re-
1 - Prema Mastrihtskom kriterijumu u iznos javnog duga ne ulaze dugovi javnih preduzeća, uključujući one za koje je garancije dala država, osim ako nije izvjesno da će ti dugovi
biti plaćeni iz budžeta države ili se već plaćaju, kao što je slučaj sa kreditom EIB za Luku Bar u iznosu od 6 miliona eura. U Annex-u 1 je dat pregled svih državno garantovanih
zajmova javnim preduzećima.
2 - Komisija za podjelu zajedničke imovine, formirana shodno članu 20 Zakona o sprovođenju Ustavne povelje DZ SCG, koja vrši i podjelu pasive NBJ još nije završila konačnu
podjelu inostranog duga (nealociranog i dijela alociranog inostranog duga) između Srbije i Crne Gore.
24

Public debt
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
public of Serbia concerning releasing of
Montenegro from obligations to the London
Club creditors on the basis of debt
buy-back by Montenegro in early 1990-
ties. Public debt share in the GDP, which
indicates a level of external indebtedness,
reached 68,7% prior to debt rescheduling,
decreasing to 31,3% at the end of 2005.
Table 2: Montenegrin Foreign Debt
Trends in the period from 2000-2005
Source: Ministry of Finance of Montenegro
Table 3 shows a structure of foreign
debt to creditors
Table 3. Structure of foreign debt of
Montenegro as of 31.December 2005
As indicated in the Table above, the largest
portion of the external public debt of
Montenegro at the end of 2005 is old refinanced
debt to the World Bank - 52,2%, or
EUR 267,9 million. The old debt to the
World Bank was refinanced in 2001 in the
framework of regulation of relations with
this institution. It was agreed that the debt
should be refinanced through six consolidation
loans. Repayment period of the loans is
30 years, with 3 years of grace period, "favourable"
interest rate - LIBOR and fixed
spread. FRY is the Borrower, while the
member states are beneficiaries of the loans,
which issued the FRY counter-guarantees.
Debt to the Paris Club amounted to
EUR 151,6 million as of 31 December 2005,
which is an amount reduced by a write-off
of 51% in the first phase. Upon expiration
of a three year arrangement with the IMF
and obtaining positive mark for macroeconomic
trends in Montenegro, it was expected
that in March 2005 the debt to the Paris
Club would be reduced by remaining
15% or about EUR 26 million (according to
negotiated debt write-off by 66%). However,
due to default in obligations by the Republic
of Serbia, such reduction did not take
place within projected deadline. Such reduction
is expected to take place in early
2006, following successful completion of
the arrangement. Old or refinanced debts
also include liabilities to the Council of Europe
Bank and International Finance Corporation
(IFC) as well as outstanding debts
to the Polish Bank Handlowy and Anglo Yugoslav
Bank.
Minor portion of external long-term liabilities
is related to borrowings following
2001, when Montenegro, as a part of the
FRY or State Union of Serbia and Montenegro,
regulated its membership and relations
with the international financial institutions
and concluded new arrangements. Newly
contracted and simultaneously drawn foreign
loans amount to EUR 77,9 million concluding
with 31 December 2005. These
loans include borrowings with: the World
Bank under the IDA terms i.e. interest-free
25

Public debt
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
loans; European Investment Bank; European
Bank for Reconstruction and Development;
European Community and German
Bank for Reconstruction (KfW).
2. INTERNAL PUBLIC DEBT
Internal public debt of Montenegro
includes: liabilities arising out of old foreign
currency savings; liabilities arising
out of borrowings from local financial and
other institutions; liabilities resulting from
issued short-term T-bills; debt contracted
by local self-governments and outstanding
budgetary payments.
Table 4. Structure and amount of
internal public debt
3. INDICATORS OF
INDEBTEDNESS OF
MONTENEGRO -
CONCLUDING REMARKS
Table below shows standard indicators
of indebtedness, calculated on the basis of
the above and currently available data.
Table 6. Indicators of indebtedness of
Montenegro for 2004
Gross Public Debt, in mil. EUR 700,4
External Public Debt, in mil. EUR 513,3
Gross Public Debt/GDP 42,7%
External Public Debt/GDP 31,3%
Source: Ministry of Finance
M.Econ. Nikola Vukićević
Source: Ministry of Finance
It is evident that borrowing on the
basis of T-bills is reduced, while debt
from bank credits is fully removed.
Accordingly, borrowing on the basis of
T-bills amounted to EUR 8,0 million or
by EUR 29,4 million less comparing to
end 2004, while debt from bank credits
amounting EUR 8,9 million at the end of
2004 was fully repaid. About EUR 6 million
of old foreign currency savings
bonds was repaid, which is less than as
planned under the annual Budget Law -
EUR 8,7 million. Liabilities arising out of
outstanding budgetary payments were
reduced by EUR 20 million, while total
local self-governments' debt was reduced
by about EUR 2 million. Domestic debt
was less by EUR 67 million totally comparing
to debt amount as of 31
December 2004.
3 - Prema projekciji Deutsche Bank Research
According to originally used methodology
of the World Bank (Debt Reporting
System), a share of external debt in Gross
Domestic Product which is less than 30%
indicates less indebted country; from 30%
to 50% indicates moderately indebted
country (Montenegro having 31,3%, is at
the lower margin of moderately indebted
countries); and share over 50% indicates a
severely indebted country. For comparison
purposes, at the end of 2004, in some countries
in transition, such indicator was as follows:
Bulgaria 57,6%; Czech Republic 37,4%;
Croatia 79,9%; Lithuania 43,2%; Hungary
59,0%; Romania 39,8%; Slovenia 50,1%.
Taking into account further reduction of
debt to the Paris Club, constraints on further
borrowing and stabile GDP growth, it is
likely that Montenegro will be included
among less indebted countries in future.
With respect to GDP for 2005, gross
public debt of Montenegro accounted for
42,7% at the end of 2005. It is significantly
less than identified fiscal criterion and
maximum public debt allowed by the EU,
whereby Montenegro meets one of the
two Maastricht criteria.
According to the following two indicators,
given in the Table above (external
public debt/ export and repayment of foreign
debt/ export), Montenegro is classified
as a less indebted country. Namely,
share of external public debt in total
export in Montenegro accounts for 80,7%,
which is significantly less than marginal
value (165%), separating less indebted
countries from moderately indebted countries.
Level of indebtedness or proportion
of foreign debt repayment and total export
in Montenegro is 3,7%, which is also significantly
less than a limit for moderately
indebted countries which is set as 10%.
Coordinator, Debt Management
Department
NIKOLA VUKIĆEVIĆ, M.Econ.
26

World Bank and
Relations with the WB
The World Banks (WB) was founded in
1944 as an International Bank for Reconstruction
and Development (IBRD).
Its original mission was to finance the reconstruction
of nations devastated by the World
War II and at that moment it had 38 members.
The number has been increased to current
184 members. The World Bank is present
in 100 countries, having 10.600 employees
world wide.
World Bank Group consists of five closely
associated institutions:
1. The International Bank for Reconstruction
and Development (IBRD) offers loans to
mid-income countries. The funds for this lending
come primarily from the issuing of its
bonds on the global capital markets.
2. International Development Association
(IDA) offers assistance to the poorest
countries with a per capita income of less
than US$ 885, by providing interest-free
loans, technical assistance and policy advices
on national economy management. .
3. International Finance Corporation
(IFC) promotes growth in member countries
through private sector and real investments.
4. Multilateral Investment Guarantee
Agency (MIGA) promotes the flow of foreign
direct investment among member countries
by insuring investors against non-commercial
(political) risk, and by providing promotional
and advisory services to help member
countries create an attractive investment climate.
5. The International Centre for Settlement
of Investment Disputes (ICSID) provides
facilities for conciliation and arbitration
of investment disputes between Contracting
States and nationals of other Contracting States.
Ex-SFRY was a member country of all
these five affiliations of the World Bank
Group.
International Bank for Reconstruction
and Development (IBRD) was founded in
1944 at the Bretton Woods Conference simultaneously
with the International Monetary
Fund. Yugoslavia was one of the 38 founding
countries of the two international financial
organizations. Upon signing documentation
in Washington on 27 December
1945, Yugoslavia formally joined the Bank
and Fund.
Following break up of former SFRY, manner
of refinancing of outstanding liabilities
resulting from previously used loans was
agreed upon for the SRY.
On 25 February 1993, the Board of Executive
Directors of the International Bank for
Reconstruction and Development adopted
the Resolution No. 93-2, regulating the question
of cessation and succession of the SFRY
membership to this institution, according to
which SRY participates with 36,52% in share
of capital.
State Union Serbia and Montenegro renewed
membership to the World Bank in
May 2001.
Relations with World Bank
Jadranka Radunović
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Regulation of outstanding liabilities to
the IBRD has opened a perspective for new
borrowing. Serbia and Montenegro, as a
country highly burdened with debts, was
granted the IDA status in period from 2001-
2004, enabling it to contract debts with the
International Development Association
(IDA) under favourable terms
Review of Financial Arrangements
with the World Bank
Following renewal of the membership,
the World Bank has approved Montenegro
credit funds for macroeconomic stability,
market economy development and implementation
of infrastructure projects.
In addition to contacts with the WB representatives
stemming from the above financial
arrangements, representatives of the
Government of the Republic of Montenegro
held meetings in March 2004 with the International
Finance Corporation (IFC), in Istanbul
concerning unsettled claims of beneficiaries
of other IFC loans from the territory of
the Republic of Montenegro. It was agreed,
inter alia, that the Government should assume
unsettled claims of legal persons to the
IFC, and that the IFC should write-off outstanding
debt interest, including default interest.
It was also agreed that the consolidated
debt - other IFC loans should be settled
by conversion of part of the debt into 10% of
share capital of the Podgorička banka, while
the remaining part of the debt should be
paid in 18 semiannual installments in a way
specified under the Agreement between the
Government and the IFC signed in mid April
2005.
Two credits extended by the World Bank
to Serbia and Montenegro in the previous
period are particularly noteworthy: Structural
Adjustment Credit I and Structural Adjustment
Credit II.
The SAC I amounting USD 15 million was
approved to Montenegro in 2002 for the
purpose of providing support to reforms in
various fields, whose middle-term objective
was establishing macroeconomic stability,
stimulating growth and improving social situation.
This credit was fully realized.
The SAC II was approved to Serbia and
Montenegro in 2004. USD 18 million of credit
funds were allocated for the Republic of
Montenegro. The credit is intended for the
reform of financial, pension and healthcare
system, including other areas as well. Delegation
of the World Bank set conditions which
are to be met for the realization of the credit,
relating to implementation of reforms in the
said fields. Planned reforms in the financial
sector will enhance transparency of overall financial
sector; and strengthen institutional
capacity and accountancy of key public sec-
27

Relations with World Bank
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
tor institutions. In December 2004, the first
tranche of the SAC II credit funds was disbursed
by the IDA to Montenegro.
Disbursement of the second tranche of
the SAC II has been postponed until the end
of the first half of 2006, when the only one
unfulfilled condition required for the realization
of the SAC II second tranche is expected
to be met: signing of an agreement on electric
energy supply between new owner of the
Aluminum Plant -Solomon Enterprise Limited
and Montenegrin Electric Power Company
Inc, Nikšić.
WB Country Assistance Strategy for
period 2005-2007
World Bank adopted the Country Assistance
Strategy for Serbia and Montenegro for
FY 2005-2007 with the aim of supporting the
EU Stabilization and Association Process as
well as the Poverty Reduction Strategy process.
The Country Assistance Strategy (CAS) is
aimed at promoting economic growth and
development by means of: creating a smaller,
more sustainable and efficient public sector;
creating larger and more dynamic private
sector; reducing the poverty level and improving
social security and access to public services.
Under the World Bank CAS for Montenegro,
the following funds are envisaged for
2006:
" Level "base case": for development of
tourism and agriculture, the credit amounting
USD 12 million (6 million IDA, 6 million
IBRD) and for the Regional Energy Project,
the credit amounting USD 3 million (IDA)
" Level "high case": for development of
tourism and agriculture, the credit amounting
USD 15 million (6 million IDA, 9 million
IBRD) and for the Regional Energy Project
World Bank
USD 3 million (IDA)
Identified areas that currently represent
obstacle for the development of Montenegro,
where the World Bank may offer its assistance
either by providing credit funds or expert
assistance for related reforms are as follows:
- Infrastructure - waterworks and roads,
representing obstacle for tourism development,
- Regional energy market as the World
Bank project
- Pension system and further reforms -
already launched using existing credit
- Healthcare system and further reforms
- already launched using existing credit
- Reform of judiciary
In the negotiations with the World Bank
representatives, possibility for the Central
Bank of Montenegro to become certified to
conduct transactions with the World Bank is
under consideration. In addition to promoting
the very institution, the transaction
costs would be significantly cut, given the reduced
number of intermediaries. The WB representatives
were advised to consider possibility
of opening a WB Office in Montenegro
(in addition to the existing Office in Belgrade)
for the purpose of establishing a higher
quality co-operation and exchange of information
with the World Bank. For the time
being, the only representative of the World
Bank works with the Central Bank of Montenegro.
Sector for Economy, Finance,
International Co-operation
and Games of Chance System
JADRANKA RADUNOVIĆ, Coordinator,
International Co-operation Department
28

State aid
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
State aid
With future signing of the Stabilization
and Association
Agreement (SAA), obligation
to harmonize national legislation with
the EU regulations enters into force,
including adoption of a Law on State
Aid Control which is to be adopted by
the Parliament of Montenegro. Upon
adoption of the Law, a single regulation
will be introduced in the state aid field,
based on principles of market economy,
with the aim of maintaining competition
and meeting internationally assumed
obligations.
The Ministry of Finance, together
with expert assistance from the PLAC
(Policy and Legal Advice Center, the EU
financed project) consultants, has been
working on a Draft Law on State Aid
Control, the adoption of which is scheduled
for the second quarter of 2006
under the Government Agenda. The
Draft Law has also been submitted to
the European Commission, which positively
marked both the Law and progress
achieved in the field of creating and introduction
of regulations in the area of
state aid in Montenegro.
The fact is that single regulatory framework
in the field of state aid has been
in place in the EU for many years. Upon
implementation of the regulatory and
institutional framework for state aid
control in Montenegro, earlier practice
will cease to exist, according to which
granting of the state aid has been governed
by individual enactments, with no
precise conditions and rules for its preparation
and allocation, and with no
mechanisms of control for granting, use,
subsequent approval and recovery of the
state aid.
Therefore, by adoption of the Law on
State Aid Control, general conditions
and rules for preparation, granting, control
of granting and use, subsequent approval
and recovery of state aid will be
defined, which will enable: phasing out
of any kind of state aid that distorts or
threatens to distort competition by giving
advantage to certain companies or
products, which is assessed according to
the rule on competition in the EU (Articles
81,82,86,87 of the Treaty on European
Union); establishing of an independent
operational agency authorized for
supervision and control of the procedure
related to granting and use, subsequent
approval and recovery of state
aid, which will be empowered to assess
programs and individual state aids and
to order recovery of unlawful state aid.
Establishing of a transparent system
of state aid control also has positive effects
by itself with respect to economic
policy making, rational planning of the
state budget and budget deficit management,
easier reporting and efficient cooperation
with international institutions
with which Montenegro has financial
arrangements, as well with respect
to making appropriate industrial policies
and regional development policies.
In favour of transparency in the field of
state aid, in compliance with the European
Commission recommendations,
the Ministry of Finance submitted the
first Report on Inventory of State Aid in
the Republic of Montenegro to the
Commission in August 2005. The Report
on Inventory of State Aid in the Republic
of Montenegro covers all direct state
subventions paid from the budget of
the Republic of Montenegro, including
any payment facilities and exemptions
in 2003 and 2004.
29

State aid
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
During the last meeting of the EC
Enhanced Permanent Dialogue with the
representatives of Montenegro, the
Commission positively marked progress
achieved in the area of state aid, noting
that the Ministry of Finance of Montenegro
did a lot within a short 10 month
period of time.
LEGAL REGULATIONS
CONCERNING THE STATE AID
CONTROL IN THE EU
The state aid system in the European
Union is defined under the Articles 87
and 88 of the Treaty Establishing the European
Community (hereinafter referred
to as the Treaty).
Pursuant to relevant EU regulations,
state aid means any aid in terms of benefit
or advantage granted by a state, or
from state resources through a public,
state authority, which favours certain
companies or products (selection principle)
or distorts or may distort level playing
field in market
According to Article 87, paragraph 1
of the Treaty, the following shall be deemed
state aid:
1. any aid granted through State resources;
2. any aid which favours certain undertakings,
sector or region
3. any aid which is selective because
it distorts the market competition by favouring
certain undertakings, sector or
region;
4. any aid which affects competition
and trade between Member States.
Types of state aids are as follows: horizontal
state aid (intended for all economic
entities participating in the market),
sectoral state aid (intended for
economic entities within specific economic
and non-economic activities) and
regional state aid (intended for less
developed areas).
State aid may include: subventions,
tax allowances or any other form of
Danijela Jauković
non-payment of state fees; exemptions
from payment of social contributions;
granting interest rates/loans/guarantees/real
estate under conditions which
are more favourable then market ones;
approving allowances for incurred business
losses; export aid or regressive export
crediting; establishing funds for
development/housing construction;
providing income and price support;
providing goods or services which are
not part of the public services; approving
more favourable treatment in the
public procurement, etc.
Certain categories of the horizontal,
sectoral and regional state aid may be
allowed under conditions set forth under
the EU by-laws.
According to regulations and methodology
of the EU, the following shall not
be considered state aid: aid for beneficiaries
which are not economic entities
(households, handicapped persons, aid
for infrastructure, educational institutions,
hospitals, public housing, vocational
training centers); general economic
policy measures (quotas, public procurement,
technical standards, general VAT
reduction); aid granted by national and
multinational organizations, EU funds,
government functions (defense, public
works).
Article 88 of the Treaty defines procedure
related to applying for and control
of state aid, which is under the
competence of a separate European
Commission established to this end. The
European Commission, together with
Member States, constantly monitors all
systems of aid existing within Member
States and requires appropriate measures
required for gradual development
and action. Such authorization enables
the Commission to indicate a change in
state of affairs (by monitoring progressive
development or functioning of
common market) and accordingly
launch examination of the existing state
aid.
If the European Commission finds
that an aid granted by a Member State
or through State resources is not in
compliance with acquis communitarie
or with common market or such aid is
being misused, it shall decide that the
State concerned shall abolish or alter
such aid within a period of time to be
determined by the Commission. If the
State concerned does not comply with
this decision within the prescribed time,
the Commission may refer the matter to
the Court of Justice
On application by a Member State,
the EU Council (hereinafter referred to
as the Council) may decide that aid
which that State is granting or intends
to grant shall be considered to be compatible
with the common market, if
such a decision is justified by exceptional
circumstances If, however, the Council
has not made its attitude known within
three months of the said application
being made, the European Commission
shall give its decision on the case.
Regulations governing state aid by
the WTO and those in the European
Union are compatible particularly with
respect to definitions and practical purposes.
ADVISOR TO THE MINISTER
On co-operation with the EU
and international
financial institutions
DANIJELA JAUKOVIĆ,
30

Enforcement of claims
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Enforcement of claims
secured by the Contract on
Fiduciary Transfer of Immovable
Property Ownership Right
Development of the monetary transactions,
credits, banking and other
forms of debtor-creditor relations
brought about debt security problem. Creditors
have more confidence in the right of
pledge, as a mean of security, because the
credit is then really secured.
Pledge, as a mean of security, has a history
in the Roman Law as trust and mortgage
as well as in the Customary Law in the
old Montenegro, when a debt was secured
by Property Title Deed, and the existing documents
testify to it. This issue is now regulated
in the legal system of Montenegro by
the Law on Trust, Law on Mortgage and
Law on Pledge.
In the course of allocation of credit
funds from the Republic Budget, the Government
of the Republic of Montenegro
decided to secure credits through concluding
Fiduciary Contracts. Real Estate Administration
is in charge of estimation of property
value, which is taken into trust. Pursuant
to the provisions of the Law, this Administration
is also established as specialized
agency for registration of the contracts
in the Real Estate Register. The Ministry of
Finance uses the other two laws to secure
debt only in cases when it is not possible to
register a trust.
Namely, in the period of the UN sanctions,
on the proposal of relevant Ministries
and according to appropriate decisions of
the Government, funds from the Republic
Budget were approved for crediting the tourist
economy for the purpose of creation of
conditions for summer and winter tourist
season. For the aforementioned purposes
over 17,0 mil. eur was approved, and in order
to secure the extended credits, for the
following companies' property was registered
trust: "Ada Bojana" - Ulcinj riviera, Vila
"Albatros" - HTP "Albatros". Hotel "Sozina" -
HTP "Korali", Hotel "Palas" - HTP "Budvanska
rivijera", Hotel "Tivat" - HTP "Primorje",
Autocamp "Ciparis" - HTP "Mimoza" - Tivat,
administrative building in Jaz - Montenegroexpress,
Autocamp in Dobrota - HTP
"Fjord", trust was also registered for five facilities
HPT "Boka", Hotels "Boan" and "Šavnik"
- HTP "Onogošt", six catering and
tourst establishments of the SKI Center
"Durmitor", Hotel "Mojkovac" - HTP Mojkovac,
Restaurant "Kisjele vode" - HTP "Brskovo"
Bijelo Polje, annexe to the Hotel "Lokve"
- HTP "Berane", two tourist facilities HTP
"Bjelasica" - Kolašin, Small stadium of the
Sports Center Nikšić, Hotel "Bor" - HTP
"Plavsko jezero", Hotel "Rožaje" - GTP "Turjak",
Hotel "Grand" Cetinje - "Turist" Cetinje
etc.
Apart from tourist economy, in the framework
of credit support to economy and
realization of the Program of Restructuring
as an instrument of credit security, the Ministry
of Finance registered trust also in relation
to the other companies' property,
mostly administration buildings, land or
social standard facilities.
In the procedure of privatization of
Montenegrobank, the Ministry of Finance
assumed certain claims as well as significant
property registered by the Bank for the
purpose of approved credits security, which
value amounts to over 12,0 mil. eur. On this
basis Hotel "Galeb" - property of HTP "Ulcinjska
rivijera" was assumed, and the ownership
was transferred to the benefit of Government,
Factory of Juices "Primorka" -
Bar, five manufacturing divisions "Eksport
drva" - Kolašin (ownership transferred to
the Government), administrative building
"V. Kruščića" - Mojkovac (ownership transferred
to the Government), property "Restaur
Art" - Budva (land and several flats in
Budva, also registered to the benefit of Government),
administrative building EI
"Obod" - Cetinje (transferred ownership),
bus station in Budva and land in Podgorica
- ownership "Merkur" Budva etc.
Ministry of Finance keeps relevant records
and valid documentation, on the basis
of which the enforcment of claims is executed,
for the aforementioned and other fiduciary
property.
ENFORCEMENT OF CLAIMS
In the procedure of initiating the enforcement
of claims, the Ministry of Finance
reviews the company's status, its financial
standing and development perspective.
Thus, the Government of the Republic of
Montenegro, on the proposal of relevant
ministry and consent of the Ministry of Finance,
to the benefit of resolving the future
development of company or its privatization,
approves debt restructuring, debt conversion
into shares (e.g. Metalac - Nikšić,
Factory "4. novembar" - Mojkovac etc.) or,
in relation to extraordinary cases, when the
future of company is certain, it releases the
debt (Mill "M. Asović" - Nikšić, "Javorak" -
Nikšić, Brown coal mine Berane, ŠIP "Berane"
- Berane, "Vukman Kruščić" - Mojkovac
etc.).
When debt recovery is done through
bankruptcy, the Ministry of Finance and
Government also have impact on social and
economic status of debtors as well as on the
privatization process. In that process, special
attention is paid to workers of companies
and their enforcement of rights. As regards
certain cases the Government abandoned
the enforcement priorities or a part
of debt to the benefit of workers (SKI Cen-
31

Enfocement of claims
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
ter "Durmitor", "Špiro Dacić" - Bijelo Polje,
"19 decembar" - Podgorica, "Obod genex" -
Cetinje, Jugooceanija - Kotor).
In accordance with the said, if the debtor
is not able to settle the credit within fixed
terms, the Ministry of Finance mostly
proposes to enforce the claims through property
sale and payment of funds to the account
of Treasury. But, in certain cases in
the interest of the Government and its bodies,
a part of property is taken over for the
public institutions' needs. Thus, Hotel
"Park" was taken over from HTP "Boka" -
Herceg Novi for the needs of the Ministry of
Interior - Regional Center for Underwater
Mine Clearance, to the amount of
2.423.341,00 eur, two facilities HTP "Bjelasica"
Kolašin were assumed for the needs of
the National park "Biogradska gora" and secondary
school "Braća Selić" in Kolašin to
the aggregate value of about 180.000,00 eur,
business premises of "Lovćeninvest" Podgorica
in Malo Brdo were taken for the needs
of Institute for Accounting and Auditing
etc.
In the course of enforcement the Ministry
of Finance pays special attention to enforcement
of claims assumed from Montenegrobank,
especially because it is the
World Bank's requirement and condition to
obtain special privileges in relation to credit
funds withdrawal.
Enforcement of claims is done mostly
through the following procedures:
1. In case of debtors in bankruptcy,
Milodarka Novosel
the Ministry of Finance decided to enforce
claims pursuant to the Law on Economic
Companies Insolvency, according to which
secured creditors have enforcement priority.
In that way, through bankruptcy the claim
to the amount of (219.000,00 eur) was
enforced against HTP "Fjord" - Kotor, started
enforcement of claims against HTP "Ulcinjska
rivijera" in bankruptcy proceeding
(1,7 mil. eur collected), SKI Center "Durmitor"
(778.900,00 eur collected), against
company "Špiro Dacić" - Bijelo Polje Polje
585.000,00 eur collected, and as regards the
companies "Vukman Kruščić" and "Eksportdrvo"
- Kolašin the property was transferred
to the Government to the amount exceeding
500.000,00 eur etc.
2. As regards a number of debtors
the debt was restructured, but the registered
trust is to be kept until the debt is completely
repaid, what is the case with company
HTP "Primorje" - Tivat, TUP "Brskovo" -
Bijelo Polje, "Ekozeta" - Podgorica, company
"Merkur" - Budva, company "Mehanik trade"
- Nikšić, "Budvanske rivijere" - Budva,
"Beranke" - Berane, "Primorke" - Bar, etc.
3. As regards a number of debtors,
which have mutual obligations and claims,
the debt is settled by means of mutual
offsetting, what is the case with comapany
HTP "Plavsko jezero" - Plav, "Vektra" - Podgorica.
There are also debt offsetting proposals
in relation to some other debtors.
4. The greatest part of debt is recovered
by encumbered assets sale. Aiming at a
more efficient sale, the Ministry of Finance
established a Commission for Sale, composed
of representatives of the Ministry, debtors
and relevant Ministry, which was a
proposer of credit funds allocation. So far,
in this manner were sold facility "Mali stadion"
- property of the Sports Center - Nikšić
(debt due to the Budget 34.000,00 eur
and Tax Administration 110.000,00 eur),
Hotel "Mojkovac" ownership HTP "Mojkovac"
(debt recovered to the amount of
129.000,00 eur), facility "Vukman Kruščić" -
Mojkovac (debt recovered to the amount of
48.000,00 eur) , Autocamp "Ciparis" (debt
recovered to the amount of 626.996,00
eur), company HTP "Boka" motel "Palas"
was sold and debt recovered to the amount
of 215.356,00 eur.
We note that a part of property is sold
for foreign currency savings bonds of citizens,
what is of special importance in order
to disburden the budget of the Republic on
this basis, what was especially considered in
the Bulletin No. 2.
Finally, it can be concluded that Contract
on Fiduciary Transfer of Immovable
Property Ownership Right, which was concluded
pursuant to the law and registered
in the Real Estate Register, is the best instrument
of debt security, what 2004 and
2005, over 4,0 mil. eur of claims were enforced
only on this basis, while the value of property
transferred to the Government of
the Republic of Montenegro exceeds 10,0
mil. eur and its sale is expected in the current
year. Therefore, the Ministry of Finance
is well organized to enforce the claims on
this basis and it will continue these activities
also in 2006.
Of course, financial support to economy
was approved in order to maintain certain
economic entities in the past period.
Therefore, in the debt collection procedure
it takes into account not to bring into danger
the debtors' interests in the privatization
and economic recovery period.
SECTOR FOR CORPORATE SERVICES
AND PROPERTY-LEGAL AFFAIRS
Independent Adviser,
MILODARKA NOVOSEL
32

Enforcement of claims
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Enforcement of claims by the
Government of the Republic of
Montenegro in Court procedures
Following organization and status
changes of: Jugobanka AD Podgorica,
Montenegrobanka AD Podgorica,
Bank for Development of Montenegro
and Republic Directorate for Commodity
Reserves, the Government of the Republic
of Montenegro - Ministry of Finance
assumed the claims, which are due to these
legal entities against their clients on the
basis of realized debenture arrangements.
Ministry of Finance by the nature of
its competence enforces also claims of
the Government on the basis of credit
funds approved from the Budget of the
Republic of Montenegro.
In the past activities in relation to enforcement
of these claims, the Ministry of
Finance consolidated all the assumed claims
with the same debtor - according to
all mentioned basis so that 370 legal entities
- debtors were entered in the Ministry
of Finance database. Such approach
provides for the best debt management
and offers the biggest number of possibilities
to resolve and collect the claims,
what represents special interest for the
Republic and of course the end debtor.
While reviewing the status of debt,
the Ministry of Finance stated that credit
beneficiaries did not settle their claims
although the agreed term became due.
Therefore, the Ministry decided to process
court procedures in the jurisdiction
of the territory of the Republic of Montenegro,
as one of the models of due claims
enforcement. Pursuant to the Law on Public
Prosecutor, the Public Prosecutor represents
the Republic in the property-legal
disputes. The Ministry of Finance and
Public Prosecutor established permanent
cooperation, through offering advice and
proposals, due dilligence testing, submitting
requested documentation, etc.
By application of the Law on Foreign
Debt and Old Foreign Exchange Savings,
Law on Budget and Law on Economic Enterprizes
Insolvency, the Ministry of Finance
undertook several activities until
the end of 2005 in order to enforce the
aforementioned creditors' claims through
court procedures to the total amount
of 3.403.601,47 eur.
The cases were submitted to the Public
Prosecutor in order to institute civil
and enforcement proceedings in the
competent courts.
The claims against debtors which
bunkruptcy proceedings and property
sale for the purpose of enforcement of
claims to the amount of 20.049.926,35
eur are still pending in the competent
courts in the territory of the Republic of
Montenegro. This was reported to the
competent courts by the Government of
the Republic of Montenegro ("Autoprevozno"
- Nikšić, "Gornji Ibar" - Rožaje,
"Jadran - Perast" - Perast, Pilana - Danilovgrad,
ŠP A.D. "Šumarstvo" - Rožaje,
"Velimir Jakić" - Pljevlja, Coal Mine - Berane,
"Šuplja stijena" - Pljevlja, ŠIK "Bor" -
Plav, ŠIP "Berane" - Berane, "Beranka" -
Berane etc.). This amount includes also
claims on the basis of foreign credits extended
by the international credit institutions.
But, having in mind that these
are generally unsecured credits and bad
financial standing of end users to repay
credits, the collection procedure will be
relatively long and the outcome will be
uncertain.
According to the Ministry of Finance
records, the Government of the Republic
of Montenegro claims, which have been
settled so far by the final court decision,
amount to 606.609,22 eur ("Veleprodaja"
- Berane, "Ribarstvo" - Rijeka Crnojevića,
Directorate of Public Works of Montenegro
- Podgorica, Sugar Factory "Kovin").
In addition, the statement of claim
was adopted in the first instance procedure
in relation to the cases "Iling" - Kolašin
and "Maestraltours" - Budva to the
total amount of 169.782,30eur.
Claims of the Republic of Montenegro
include also credits extended by the
Employment Bureau, from the Republic's
funds, through Montenegrobank and as
self-employment Project. 32.343,00 eur
have been collected on that basis so far.
Aiming at a more efficient enforcement
of claims, the Government of the
Republic of Montenegro approved conclusion
of the Contract on Debt Restructuring
with debtors under favourable
conditions (longer repayment period, lower
interest rate). Conclusion of these
contacts begun in late 2005 and it will
continue in the course of 2006.
Ministry of Finance will, within the
Sector for Corporative and Property Legal
Affairs, proceed to pay great attention to
and take necessary activities in order to
successfully and promptly enforce the
aforementioned claims.
Senior Advisor
GORDANA VUKOSLAVČEVIĆ
33

Functioning of the games of chance system
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Functioning of the games
of chance system, highlighting
activities aimed at
suppressing grey economy
(CONTROL, REGISTRATION AND RE-REGISTRATION OF ORGANIZERS OF GAMES OF CHANCE)
Introduction:
New Law on Games of Chance (»Official
Gazette of RM«, No. 52/04) entered
into force on 7 August 2004. Pursuant to
the Law, the Ministry of Finance, as a
competent authority, gives approvals -
concessions for organization of games of
chance, examines whether space-related
and technical conditions are met, and supervises
activities of organizers of games
of chance. Following adoption of the Law,
necessary by-laws were adopted within
set deadline, such as:
Rulebook on casino’s spatial and
technical conditions to be met;
Rulebook on spatial and technical
conditions for organization of games of
chance;
Rulebook on spatial and technical conditions
for a gambling machines parlor;
Rulebook on spatial and technical
conditions for organizing of bingo, TV
tombola and limited-access tombola, and
Rulebook setting conditions for performing
technical review of gambling
machines and game tables.
Accordingly, normative prerequisites
have been put in place, which are required
for implementation of the Law and
efficient functioning of the games of
chance system in general and supervision
of such system as well.
Chance Department and information
provided by local self-government authorities,
a register of organizers of games of
chance conducting activities in line with
the previous Law has been established.
According to the register, there were 72
organizers arranging games of chance, as
follows:
- TV tombola arranged by 6 organizers;
- Limited-access tombola arranged by
10 organizers;
- Lottery games arranged by 1 organizer;
- Casino games of chance arranged by
1 organizer;
- Betting games arranged by 48 organizers
within 160 betting places;
- Games of chance in gambling machines
parlor arrange by 7 organizers.
According to data under the register
and information obtained from on-site
inspection, it was clear that there had
been a large number of organizers of games
of chance who conducted their activities
without prior approval for work
and/or who violated the Games of Chance
Law by expanding their activities. As a
result of their activities in the grey zone,
budgetary revenues stemming from concession
charges were lower and, more important,
it had direct negative effect on
activities of registered organizers.
From 27 April 2005, in co-operation
with the Tax Administration inspectors,
the Ministry of Finance initiated regular
controls with regard to possession of approval
for work by organizers of games of
chance in casinos, gambling machines
parlors and betting places, as well as controls
of their business activities. 205 controls
have been conducted so far. All orga-
ACTIVITIES AIMED AT
SUPPRESSING GREY
ECONOMY IN THE
GAMES OF CHANCE FIELD:
First of all, based on data available
with the Ministry of Finance, Games of
GAMES OF CHANES DEPARTMENT: Radmila Vorotović, Head of GAMES OF CHANES
DEPARTMENT Veljko Begović, Chief inspector - GAMES OF CHANES department
34

Functioning of the games of chance system
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
nizers of games of chance without having
approval for work were requested to obtain
the same within 15 days from the day
of the control. Most of them obtained the
said approval, whereby both number of
registered organizers and revenues stemming
from concession charges were increased.
Consequently, most of the organizers
started conducting legal operations
and were registered in compliance with
the Law, fulfilling thus their liabilities
arising out of concession charges.
Out of total number of organizers
who were controlled, 9 organizers failed
to proceed as required by the inspector,
and, accordingly, they were prohibited to
conduct their activities until identified
improper management was removed, and
a request for institution of infringement
proceedings against these persons was filed.
Moreover, criminal complaint was
brought with the competent authority
against 2 organizers, who were prohibited
to conduct their activities, but who removed
the seal and continued performing
their activities in spite of the prohibition
in force.
According to Article 76 of the Games
of Chance Law (»Official Gazette of RM«,
No. 52/04), legal persons who arranged
games of chance based on approval by the
Ministry of Finance and competent local
self-government authority were allowed
to continue arranging of such games until
expiration date of the approval, but
GAMES OF CHANES DEPARTMENT
not later than a year after the day of this
Law becoming effective. Such deadline expired
on 10 August 2005. Given that conditions
for arranging of games of chance
are stricter under the new Law as compared
to the previous one, the organizers
wanted to make use of advantages granted
under previous Law so most of them
waited until closing date to apply for reregistration.
In the period from 21 July
2005 to 28 February 2006, 383 concessions
were granted for arranging of games
of chance in compliance with the
new Law on Games of Chance, as follows:
33 organizers of betting games obtained
concession to open 330 betting places.
12 organizers of games of chance in
the gambling machines parlor obtained
concession to open 40 gambling machines
parlors.
2 organizers of TV tombola obtained
concession to arrange 3 TV tombolas.
9 organizers of limited-access tombola
obtained concession to arrange 9 limited-access
tombolas.
1 organizar of casino games obtained
concession to open a casino.
All organizers who obtained concessions
regularly fulfill their obligations.
Financial effects are as follows:
In 2004, total revenues stemming
from concession charges amounted to
1.424.415,37 eur, or on average about
119.000eur per month.
In 2005, total revenues stemming
from concession charges amounted to
1.763.091,59 eur, or on average
146.924,30 eur per month. Out of this
amount, until new Law became effective,
i.e. for the first 7 months, the revenues
amounted to 901.669,92 eur or on average
128.809,98 eur per month. For the last
5 months in 2005, the revenues amounted
to 861.421,67 eur or on average
172.284,20 eur per month.
- Revenues in January 2006 amounted
to 215.366.83 eur.
- Revenues in February 2006 amounted
to 301.175.04 eur.
***
The Law on Games of Chance and related
by-laws created institutional framework
for a more regulated and functional
games of chance system. The organizers
were given time period and possibility to
harmonize their activities with the new
Law within the transitional period. At the
same time, from the very adoption of the
Law, Ministry of Finance together with
the Tax Administration launched wellconceived
training, control and re-registration
activities with respect to the organizers
of games of chance in line with the
adopted Law. Until 10 August, i.e. expiration
of the transition period, most of the
organizers harmonized their activities
with the provisions under the new Law.
Infringement proceedings have been instituted
against those persons who failed
to harmonize their activities with the
new Law within the transition period.
Number of organizers and amount of
revenues stemming from the concession
charges (both indicators have almost
been doubled in the period from adoption
of the Law until now) indicate both
a success in the activities aimed at regulating
the games of chance system in Montenegro
and a significant elimination of
the grey economy in this field within a
short period of time. Regular inspections
both on-the-spot and from the office,
bring about apparent results.
***
Games of chance department
RADMILA VOROTOVIĆ, HEAD
VELJKO BEGOVIĆ, CHIEF INSPECTOR
35

Law on Compulsory Traffic Insurances
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Law on Compulsory
Traffic Insurances
Pursuant to the existing law, the Compulsory
Traffic Insurances are regulated
by the single Law on Property
and Personal Insurance ("Official Gazette
of the Federal Republic of Yugoslavia"
No.30/96). In contrast to that, the Draft of
the new Law on Insurance envisages adoption
of the special law on compulsory traffic
insurances.
The reason for such approach in defining
the legal regulations was determined
due to the need to include in the provisions
of this law a wide range of Republic
entities, which should not be set in the framework
of the laws regulating the conditions
and manner of establishment, doing
business and supervision of insurance
companies and companies which perform
activities linked to the insurance activities.
At the same time, separating compulsory
insurances in a special law points to significance
of this insurance and enables its
easier application. In addition, European
Union Directives, which attach special importance
to compulsory insurances, as
well as many Conventions of international
organizations in relation to traffic indicate
to special definition of regulations on the
level of compulsory insurance.
The Law on Compulsory Traffic Insurances
introduces certain novelties, such
as e.g. obligation to collect and keep data
necessary to conclude an agreement on insurance
and indemnification of damages.
In addition, this law envisages the possibility
for healthcare, pension and disability
insurance funds and voluntary healthcare
insurance funds to ask the insurance companies
to refund the amounts paid to
their insurees, within limits of obligations
assumed by the insurance agreement,
what was not enabled by the past law.
The Law envisages obligatory cooperation
of insurance companies, which handle
compulsory insurances in the Republic,
in particular in relation to:
- indemnification on the basis of the
international agreements (green cards);
- indemnification of damages caused
by uninsured, unknown vehicles and vehicles
insured with dissolved insurance companies;
- proposals of conditions and tariffs of
premiums for compulsory insurances, etc.,
Novelty in the Draft Law is establishment
of an Indemnification Fund,
which will perform indemnification of damages
caused by the uninsured and unknown
vehicles and damages caused by the
vehicles insured with the dissolved insurance
companies. The activities, which were
transferred to the Association of Insurance
Organizations of Serbia and Montenegro,
(Guarantee Fund) by means of public
authorizations in accordance with the
past insurance, will be dealt with on the
level of the Republic of Montenegro according
to the new regulations. The Indemnification
Fund is to be established within
the regulatory body, and the manner of its
functioning will be regulated by special regulations.
Such regulations are adjusted to the
conditions of Montenegrin Insurance
Market.
Milanka Obradović
Draft Law on Compulsory Traffic Insurances
consists of the following nine chapters:
Basic Provisions; Insurance of Passengers
in Public Transport against Consequences
of Accident; Insurance of Motor
Vehicles Owners against responsibility for
damage inflicted to third parties; Insurance
of Vessels Owners against responsibility
for damage inflicted on third parties; Insurance
of Aircrafts Owners against responsibility
for damage inflicted on third parties;
Cooperation of Insurance Companies
and Branches of Foreign Insurance Companies;
Indemnification Fund; Penalty
Provisions; Transitional and Final Provisions.
Adoption of this law will regulate the
compulsory insurances issue in Montenegro
in a more comprehensive manner and
provide for protection of the citizens of
Montenegro by means of relevant penalty
policy in the framework of responsibility
for damages caused by the traffic vehicles
in the public transport.
Department for insurance control
Coordinator of the Department,
MILANKA OBRADOVIĆ
36

Agenda of the Ministry of Finance
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Agenda of the
Ministry of Finance for 2006
I. THEMATIC PART
ECONOMIC POLICY AND
ECONOMIC DEVELOPMENT
1.Information on the existing business
barriers with proposal to adopt relevant
regulations aimed at their elimination
Information will make reference to the
existing business barriers, assesment of situation
and proposal to adopt relevant regulations
aimed at their elimination.
Analyzer: Ministry of Economy, Ministry
of Tourism, Ministry of Environmental Protection
and Spatial Planning, Ministry of Finance
and Ministry of Justice
Term: I quarter
Working group in charge:
Commission for Economic Policy and
Economic Development
Commission for Financial System and
Public Expenditures
Commission for Political System and Internal
Policy
2. Feasibility study of setting up regulatory
mechanisms, which are related
to privatization of enterprizes in the
field of utility services
The study will examine possible models
of regulatory mechanisms, which will provide
for a clear and transparent manner of realization
of preceding activities, on the basis
of which the privatization process public utility
enterprizes will be carried out, and
which will be respected by the local self-governance
units. In addition, the Study will
define also the manner of determination of
services and delivered products prices policy
in the field of utility services.
Analyzer: Ministry of Environmental
Protection and Spatial Planning in cooperation
with the Ministry of Finance, Ministry
of Justice, Agency for Economic Restructuring
and Foreign Investments and Community
of Municipalities of Montenegro
Term: III quarter
Working groups in charge:
Commission for Economic Policy and
Economic Development
Commission for Financial System and
Public Expenditures
3. Feasibility study for establishment
of a special entity for housing
policy and National Housing Fund
The objective of this study is to examine
the most acceptable model for Montenegro
for realization of activities related to the development
in the field of housing, and in
that connection, efficient implementation of
Action Plan for Housing Policy as well as National
Housing Fund.
Analyzer: Ministry of Environmental
Protection and Spatial Planning in cooperation
with the Ministry of Finance, Ministry
of Justice, Agency for Economic Restructuring
and Foreign Investments and Community
of Municipalities of Montenegro
Term: IV quarter
Working groups in charge:
Commission for Economic Policy and
Economic Development
Commission for Financial System and
Public Expenditures
FINANCIAL SYSTEM, SOCIAL
ACTIVITIES AND SOCIAL
POLICY MEASURES
1.Guidelines for capital budget drafting
The guidelines will define the manner
and procedure of capital budget drafting for
the purpose of a more transparent financial
reporting and providing a base for more quality
decision-making in the area of economic
policy.
Analyzer: Ministry of Finance
Term: I quarter
Working groups in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
Commission for Budget
2. Report on status of the public
debt of Montenegro (until December 31,
2005), with reference to implementation
of the Strategy for Public Debt Management
of the Republic in 2005
The report will present the status of public
debt on December 31, 2005.
Analyzer: Ministry of Finance
Term: I quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
3.Tax policy realization analysis for
2005
The analysis will examine the tax policy
application effects in the previous year and
its influence on economy, budget and funds.
It will also propose the relevant measures for
the policy improvement in the next year.
Analyzer: Ministry of Finance, in cooperation
with the Tax Administration
Term: I quarter
Working groups in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
4. Report on consolidated public expenditures
(central budget, extrabudgetary
funds and municipalities) in 2005
This report will elaborate indicators of
the consolidated public expenditures (central
budget, extrabudgetary funds and municipalities)
in 2005.
Analyzer: Ministry of Finance
Term: I quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
5.Report on macrofiscal developments
The report will contain indicators, which
are related to the macrofiscal developments.
Analyzer: Ministry of Finance
Term: quarterly
Working group in charge:
Commission for Financial System and
Public Expenditures
6.Report on implementation of the
adopted Health Financial System Sustainability
Plan for 2005-2007
Aiming at proceeding with the planned
Health System Reform implementation, dynamics
of implementation of the adopted
plan will be reviewed. Report on implementation
of the project ''Health System Promotion
in Montenegro“, which is being carried
out in cooperation with the World Bank, will
37

Agenda of the Ministry of Finance
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
also be submitted quarterly.
Analyzer: Ministry of Health, in cooperation
with the Ministry of Finance and Republic
Health Insurance Fund
Term: quarterly
Working group in charge:
Commission for Financial System and
Public Expenditures
7. Information on planned rationalizations
of activities and work of the
health institutions
The information will serve to propose
measures of rationalization of activities and
work of the health institutions in Montenegro.
Analyzer: Ministry of Health, in cooperation
with the Ministry of Finance and Republic
Helath Insurance Fund
Term: I quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
8.Report on macroeconomic and fiscal
policy realization in the first six
months and proposal of objectives and
guidelines of fiscal policy on the basis of
which the receipts and expenses are
planned for the next year
Pursuant to provisions of Article 20, paragraph
1 of the Law on Budget, the report
will contain data which include analysis of
macroeconomic aggregates development, as
starting point for budgetary planning, which
are related to the development of gross domestic
product, prices, earnings and employment.
Analyzer: Ministry of Finance
Term: July 31, 2006
Working groups in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
Commission for Budget
9.Analysis of own source revenues
collection of the Republic Health Insurance
Fund
Analysis of own source revenues collection
of the Fund will serve to define the proposal
of increase of coverage and efficiency
in the aforementioned receipts collection.
Analyzer: Ministry of Finance, in cooperation
with the Ministry of Health, Republic
Health Insurance Fund and Tax Administration
Term: semiannually
Working group in charge:
Commission for Financial System and
Public Expenditures
10.Analysis of own source revenues
collection of the Republic Pension and
Disability Insurance Fund
Analysis of own source revenues collection
of the Fund will define the proposal of
increase of coverage and efficiency in the aforementioned
receipts collection.
Analyzer: Ministry of Finance, in cooperation
with the Ministry of Health, Republic
Pension and Disability Insurance Fund and
Tax Administration
Term: semiannually
Working group in charge:
Commission for Financial System and
Public Expenditures
11. Information on planned rationalization
of the Republic Pension and Disability
Insurance Fund
The information will reflect the activities,
which, in the framework of pension administration
reform and overall reform activities
intended for reorganization and implementation
of new business processes, are being
continuously implemented by the Fund
in relation to internal rationalization in order
to promote the technical-technological
process of work and create conditions for legal,
efficient and duly servicing of pension
and disability rights.
Analyzer: Ministry of Labour and Social
Care and Ministry of Finance in cooperation
with the Republic Pension and Disability Insurance
Fund and Tax Administration
Term: semiannually
Working group in charge:
Commission for Financial System and
Public Expenditures
12. Report on the Ministry’s work in
the field of financial system and public
expenditures and situation in the administrative
area, along with the administration
authorities’ reports on work and
situation in the areas for the purpose of
which it was established in 2005
Article 62 of the Law on Public Administration
(''Official Gazette of the Republic of
Montenegro'', No. 37/03), regulates that the
Ministries shall, at least annually, submit to
the Government the report on work and administrative
area situation. In addition, Article
72 of the Law regulates that any administration
authority shall, at least annually submit
to the Ministry a report on work and situation
in the areas for which it has been established.
The report has to consist of a
description of implementation of laws and
other regulations, realization of programs
and conclusions of the Government, measures
they undertook and results they achieved.
Analyzer: Ministry of Finance, Ministry
of Education and Science, Ministry of Culture
and Media, Ministry of Health, Ministry
of Labour and Social Care
Term: III quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
13.Report on consolidated public expenditures
(central budget, extrabudgetary
funds and municipalities) for the
period January – June 2006
This report will refer to the indicators of
consolidated public expenditures (central
budget, extrabudgetary funds and municipalities)
for the period January – June 2006
Analyzer: Ministry of Finance
Term: III quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
14. Report on implementation of PA-
CO Impact – Council of Europe project
for the Anti-corruption Initiative Administration
capacities strenghtening
PACO Impact – Council of Europe project
is aimed at supporting the Southeastern
Europe countries to implement the activities
related to drafting and implementation of
anti-corruption plans and strategies. In the
framework of planned activities for Montenegro
it is envisaged to strenghten capacities
of the Anti-corruption Initiative Administration,
which will be especially related to intensification
of cooperation between the
competent authorities for prevention and
combating corruption, public awareness
raising about the manifestations of corruption,
negative corruption trends and strenghtening
the citizens’ role in revealing and
preventing corruption.
Analyzer: Ministry of Finance in cooperation
with the Anti-corruption Initiative
Administration
Term: III quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Political System and Internal
Policy
15. Analysis of tax policy implementation
for the period January - October
2006
The analysis will examine the tax policy
application effects in the first 10 months in
2006 and its influence on the economy, Budget
and funds, and it will propose relevant
measures for promotion of the policy in the
next year.
Analyzer: Ministry of Finance, in coope-
38

Agenda of the Ministry of Finance
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
ration with Tax Administration
Term: IV quarter - December
Working groups in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
16.Report on execution of the annual
auditing plan of the Budget beneficiaries
The report will include the review of audits
done in 2006 on the basis of annual auditing
plan for 2006 with key findings,
which occurred in the procedure of auditing
the controlled Budget beneficiaries.
Analyzer: Ministry of Finance
Term: IV quarter
Working gorup in charge:
Commission for Financial System and
Public Expenditures
II. NORMATIVE PART
ECONOMIC POLICY AND
ECONOMIC DEVELOPMENT
1. Draft Law on Amendments to the
Law on Water Supply and Waste Water
and Solid Waste Disposal from the areas
of the following municipalities: Herceg
Novi, Kotor, Tivat, Budva, Bar, Ulcinj
and Cetinje and other legal and bylaw
acts related to this field
This Law will establish relations in the
areas of regional water supply, waste water
and solid waste management in accordance
with the strategic planning documents,
which are related to these areas, in the Municipalities
of the Montenegrin seaside and
Municipality of Cetinje.
Analyzer: Ministry of Environmental
Protection and Spatial Planning in cooperation
with the Ministry of Agriculture, Forestry
and Water Supply and Ministry of Finance
Term: III quarter
Working group in charge:
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
Commission for Financial System and
Public Expenditures
2. Draft Law on Housing Co-operatives
This Law will define possibilities of granting
special privileges in the area of tax and
land policy, so that all housing cooperatives
can give their contribution to the housing
problem resolution.
Analyzer: Ministry of Environmental
Protection and Spatial Planning in cooperation
with the Ministry of Finance, Ministry
of Justice, Community of Montenegrin Municipalities
and Local-governance Units.
Term: IV quarter
Working group in charge:
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
Commission for Financial System and
Public Expenditures
FINANCIAL SYSTEM, SOCIAL
ACTIVITIES AND SOCIAL
POLICY MEASURES
1.Draft Law on Public Procurement
Harmonization with the regulations of
European Union in this area will be done
and the existing legal solutions will be more
clearly and precizely defined by this Law.
Analyzer: Ministry of Finance
Term: I quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
2. Draft Law on Local Municipal Fees
The issue of public areas and fees payment
obligation system, the amount of
which will be determined by local governances’
own regulations, will be regulated in a
comprehensive manner by this law.
Analyzer: Ministry of Finance
Term: I quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
3. Draft Law on Annual Financial
Statement of the Budget of the Republic
of Montenegro for 2005
The Draft Law on Annual Financial Statement
is prepared pursuant to the Law on
Budget, which regulates the manner of preparation,
drafting and submitting the annual
statement.
Analyzer: Ministry of Finance
Term: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
Commission for Budget
4.Draft Law on Property-legal Relations
This Law will regulate the property-legal
relations in Montenegro. This is especially
for the reason that this area was until now
regulated by the Law on Elements of Property–legal
Relations (''Official Gazette of
the Socialist Federal Republic of Yugoslavia'',
No. 6/80, 36/90, 29/96). The Law will
regulate and unify also other subject-matter
included in other laws, which treat this
area.
Analyzer: Ministry of Finance in cooperation
with the Ministry of Justice
Rok: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
5. Draft Law on State Property
This Law will more precizely regulate the
monitoring of management and usage of
state property and the competence of the
Republic in this area will be defined in a more
adequate manner.
Analyzer: Ministry of Finance in cooperation
with the Ministry of Justice and Real
Estate Administration
Rok: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Political System and Internal
Policy
6.Draft Law on Mandatory Insurance
in Traffic
Directives of the European Union, which
pay special attention to mandatory insurances,
which are subject to many conventions
of international organizations in traffic, also
refer to adoption of a new Law on Mandatory
Insurance in Traffic. Regulating the mandatory
insurance by a special law indicates
to the significance of this insurance and enables
its easier application.
Analyzer: Ministry of Finance
Rok: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
7. Draft Law on Restitution of Dispossessed
Property Rights and Religious
Communities Indemnification
39

Agenda of the Ministry of Finance
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
This Law will regulate, pursuant to Article
8 paragraph 2 of the Law on Restitution
of Dispossessed Property Rights and Indemnification
(''Official Gazette of the Republic
of Montenegro'', No. 21/04), conditions,
manner and procedure of restitution of
rights of ownership and other property
rights and religious communities indemnification
for rights dispossessed for the benefit
of nation-wide, public, social and cooperative
ownership.
Analyzer: Ministry of Finance
Rok: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Political System and Internal
Policy
8. Draft Law on Amendments and
Supplements to the Law on Money-
Laundering Prevention and Terrorism Financing
This Law will harmonize the applicable
law with the ''Directive 2005 of the European
Parliament and Council of Europe on prevention
of using financial system for the
purpose of money laundering and terrorism
financing''.
Analyzer: Ministry of Finance in cooperation
with the Anti Money-Laundering
Agency
Rok: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Political System and Internal
Policy
9.Draft Law on State Aid Control
This Law will regulate general conditions
and rules for preparation, allocation, control
of allocation and usage of state aid, and subsequent
state aid approval and reimbursement.
Analyzer: Ministry of Finance
Rok: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
10. Draft Law on Tax Advisors
This Law will regulate the tax advisors activities
as an independent and autonomous
occupation, their authorizations and obligations,
aiming at creation of better prerequisites
for a more efficient tax laws application.
Analyzer: Ministry of Finance
Rok: II quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
11.Draft Law on Budget of the Republic
of Montenegro for 2007
Analyzer: Ministry of Finance
Term: November, 30, 2006
Working groups in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
Commission for Political System and Internal
Policy
Commission for Budget
12.Draft Law on Amendments and
Supplements of the Law on Local Self-
Governanace Funding
This Law will bring about improvement
of the existing solutions, which are related
to specifying the criteria to be used for allocation
of funds of the Equalization Fund,
as well as specifying own source revenues
types, which can be introduced by municipalities
in the framework of their regulations.
Analyzer: Ministry of Finance in cooperation
with the Ministry of Justice
Rok: III quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Political System and Internal
Policy
13.Draft Law on Amendments and
Supplements of the Customs Law
This Law will make adjustments to the
existing solutions with the new standards of
EU, WTO, GATA, as well as the other international
organizations.
Analyzer: Ministry of Finance in cooperation
with Minsitry for Foreign Economic
Relations and European Integration and
Customs Administration
Rok: III quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
14.Draft Law on Banks
This Law will promote the solutions
from the existing law, make adjustments to
the international standards in this area (EU
Directives and Recommendations (CAD III),
Bazel II) and create prerequisites for banking
market expansion by introducing foreign
banks’ branches without legal entity status
into the banking system.
Analyzer: Ministry of Finance in cooperation
with the Central Bank of Montenegro
Rok: IIi quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
15. Draft Law on Amendments and
Supplements to the Law on Central Bank
of Montenegro
This Law will add new and harmonize
the existing solutions with the international
practice respecting the needs of adjustment
to the economic ambience and development
plans of Montenegro.
Analyzer: Ministry of Finance in cooperation
with the Central Bank of Montenegro
Rok: IIi quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
III. BYLAW ACTS
1.Decree on appearance and contents
of the control excise stamp, manner and
procedure of approval, printing and issuing
and manner of keeping records
about issued, used and unused excise
stamps
This Decree will regulate, in accordance
with the Law on Amendments and Supplements
to the Law on Excises, appearance
and contents of the control excise stamp,
manner and procedure of approval, printing
and issuing, manner of marking and keeping
records about used and unused excise
stamps.
Analyzer: Ministry of Finance in cooperation
with Tax Administration
Rok: I quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
2.Decree on Amendments to the Decree
for Customs Law Implementation
This Decree will provide for a relevant adjustment
of terminology, in accordance with
amendments and supplements to the Customs
Law.
Analyzer: Ministry of Finance in cooperation
with the Minsitry for Foreign Economic
Relations and European Integration and
Customs Administration
Rok: III quarter
Working group in charge:
Commission for Financial System and
Public Expenditures
Commission for Economic Policy and
Economic Development
40

Activities of the minister
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Review of the most important
activities of the Minister of
Finance january- march 2006
March 24, 2006 - Vienna: Credit Contract for Medical
Equipment Procurement Funding signed between the
Healthcare Fund of the Republic of Montenegro and Austrian
«Erste bank»
"Signing of the Credit Contract
for Medical Equipment Procurement
Funding between the
Healthcare Fund of the Republic of
Montenegro and Austrian «Erste
bank», to the total amount of
4.108.250,00 Euro".
“Arrangement with the “ Erste
bank” enabled the procurement of
high quality equipment which
should promote the Montenegrin
Health System and increase the
possibilities of our citizens’ medical
treatment, said the Minister Lukšić.
The arrangement is very favorable,
approved according to the OECD conventional conditions, and it
practically consists of a significant percentage of donation, because it
is subsidized by the Austrian Government”.
March 20, 2006 – The Minister of Finance Igor Lukšić held
talks with the Ambassador of India to Serbia and Montenegro
Lavania Prasad
"The Minister Lukšić pointed to the results achieved by the Government
in the framework of the overall Montenegrin economic
system improvement, informed about the basic macroeconomic indicators
and emphasized successive improvement, which was evidently
achieved in the last three years. He said that realization of stabilization
measures and structural reforms led to constant increase of real
GDP growth in the last four years so that the preliminary estimated
rate for 2005 amounted to 4,1% and informed that the consolidated
budget deficit was around 2,7% of GDP in 2005, and aggregate
consolidated expenditure in the last years decreased from over
48% in 2003 to 46% in 2005 with the plan of 44,5% of GDP in 2006.
In addition, the Minister Lukšić pointed to the successful finalization
of arrangement with the IMF, good cooperation with the World Bank
and underlined that he expected also the integration process acceleration
in the forthcoming period".
March 16, 2006 – Statement of the Minister of Finance Igor
Lukšić following the session of the Government of the Republic
of Montenegro on the occasion of Information on the Project
"1000 housing credits", Proposal for keeping records of savers
who are the citizens of Montenegro, who deposited foreign
currency savings with the banks outside the territory of
Montenegro and Analysis of the tax policy realization for
2005.
“Thousand of housing credits with the interest rate of four percent.
The banks will calculate the interest rate of 6.4 percent and the
Government will subsidize 2.4 percent. The credits will not be offered
only to the Public Administration but also to the wider public”. Neither
the European states have cheap housing credits”.
March 14, 2006 – Receipts of the Republican Budget for the
period from January 1 to February 28, 2006
"Own source revenues in February 2006 are higher by 15,36% in
comparison to the planned and by 52,33% in comparison to realization
in February 2005.
Higher realization in comparison to the plan has been evident in
relation to all kinds of revenues (Personal Income Tax by 3,14%; Corporate
Income Tax by 2,7 times; Tax on Transfer of Real Estate and
Rights by 63,98%; Value Added Tax by 24,71%, Excises by 8,89%; International
Trade and Transactions Tax by 27,19%, other republican
taxes by 41,92%; fees by 27,67%; compensations by 53,74%).
Higher realization in February 2006 has been evident in relation
to all own source revenues in comparison to the same month of the
previous year.
Receipts of the Republican Budget for the first two months of
2006 have been realized to the amount of 62.340.387,30 eur.
Own source revenues earned to the amount of 61.650.449,41 eur,
for January and February 2006 are higher by 9.009.524,97 eur or
17,12% in comparison to the planned and by 20.626.372,96 eur or
50,28% in comparison to the same period in 2005.
Higher realization has been evidently achieved in relation to all
kinds of taxes in this period (except for the Personal Income Tax -
92,97%), court fees, compensation for games of chance organization,
compensation for roads and revenues earned by the institutions’ performance
of duties ".
41

Activities of the minister
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
March 10, 2006 – Minister of Finance Igor Lukšić hosted a
working lunch with the media representatives
- TOPIC: Stabilization and Association Process and negotiations
on Stabilization and Association of Montenegro to the
European Union.
“The Government will soon complete the draft Law on State Aid,
which should introduce European standards to Montenegro. It represents
another condition to be met in order to access the European
Union. European regulations imply that it is allowed to assist the
industrial branches as whole, not individual enterprises”.
gorička bank and emphasized that it was very significant, both in the
view of regaining the citizens’ confidence into the banking system
and the overall reform and development of banking sector in Montenegro.
He pointed out that this example proved that investment
risks in Montenegro show tendency of significant decrease and that
signing the agreement with one of the biggest European banks,
which entered the Montenegrin market, would bring about increase
in competition of domestic banking system, what was a justified belief.
It was jointly assessed that Podgorička bank privatization was
one of the most significant and very successful privatizations – implemented
in the last period, as well as that, on the basis of the up
to now results, numerous positive breakthroughs could be stated since
«Societe General» arrived.
Mart 3, 2006 – Parliament of the Republic of Montenegro
at the session from March 1, 2006 adopted the Law on Referendum
on State – Legal Status of the Republic of Montenegro,
which was published in the "Official Gazette of the Republic
of Montenegro“, No 12/06.
Pursuant to the provisions of the aforementioned law (Article
34), funds for implementation of the referendum shall be provided
from the budgetary funds of the Republic. Apart from the funds for
implementation of the referendum, the amount of 2.000.000,00 eur
will be allocated from the budgetary funds not later than three days
after the decision is made to call the referendum for the purpose of
the referendum campaign funding for both referendum options
(1.000.000,00eur for each referendum option). Funds for the referendum
campaign funding are to be allocated to the referendum campaign
entities, registered in accordance with the quoted law, who
shall be obliged, pursuant to the provisions of Article 39 of the Law,
to open a special giro account with an organ authorized to perform
payment operations, which can not be used for other purposes but
for collection of funds for the referendum campaign costs funding
and for all payments linked to the referendum campaign costs funding.
January 17, 2006 – Minister of Finance Dr Igor Lukšić took
part in the Euromoney Conference in Vienna
Minister Lukšić presented progress in achieving macroeconomic
stability and economic indicators realization. He presented challenges
in the framework of economic policy for the next period and emphasized
the investment opportunities for the territory of Montenegro.
It was underlined that important political processes in Montenegro,
first of all, the referendum on independence in May, would not
influence the economic developments and reform processes, which
had no alternative.
PR SERVICE OF THE MINISTRY
Spokesperson, Ana Miljanić
Senior employee I, Maja Bašić
March 9, 2006 – The Minister of Finance Dr Igor Lukšić
held talks with the delegation of the French Bank "Societe Generale"
and Director General of "Podgorička bank" Mladen Rabrenović
"Minister Lukšić expressed his satisfaction over the arrival of «Societe
Generale» to Montenegro and successful privatization of Pod-
42

Macrofiscal report
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
Report on macrofiscal developments
in the 1st quarter of 2006
The Report on macrofiscal developments in the 1 st quarter of 2006
has been based on data under the financial statements of the budget of
the Republic of Montenegro, extrabudgetary funds and local self-government
units. The objective of the Report is to monitor realization of
planned macrofiscal dimensions quarterly.
Objectives of the public spending policy in 2006 include: continuation
of the reforms implementation towards the accession to the EU;
formalization of the grey economy; competition protection and
improvement of competitiveness; companies and banks restructuring;
and maintaining macroeconomic stability together with reduction of
the public spending.
Public spending in 2006 is projected to the amount of 785,26 mil.
eur, or 44,64% of the GDP of the Republic of Montenegro. Deficit in
public spending is projected to amount 38,77 mil. eur or 2,2 % of GDP.
1. PUBLIC SPENDING
Public spending in the first quarter of 2006 amounted to 174.13
mil.eur. Deficit in public spending in the same period amounted to 1.99
mil.eur, out of which Government budget deficit accounts for 5.49 mil.eur,
Pension and Disability Insurance Fund - 0.63 mil.eur , Health Insurance
Fund- 0.46 mil.eur and local self-governments - 0.69 mil.eur. The
Employment Agency has made a surplus to the amount of 3.50 mil.eur.
Deficit in public spending, together with net repayment of domestic
and foreign debt, was financed from the privatization receipts to the
amount of 3.59 mil.eur and by reduction of deposit by 7.99 mil.eur.
The Table below shows public spending realized in the first quarter
of 2006:
Total deficit in public spending on cash basis amounted 1.99 mil.eur
for the first quarter of this year. The deficit was realized as follows:
Government budget: to the amount of 5.49 mil.eur and was covered
by the privatization receipts to the amount of 0.65 mil.eur, and by
reduction of deposit to the amount of 11.19 mil.eur.
Pension and Disability Insurance Fund: to the amount of 0.63
mil.eur and was covered by the privatization receipts to the amount of
2.51 mil.eur.
Health Insurance Fund realized deficit in the first quarter to the
amount of 0.46 mil.eur and was financed by reduction of deposit at the
amount of 1.77 mil.eur
Employment Agency has made a surplus to the amount of 3.50
mil.eur , and if income from the sold property to the amount of 0.42
mil.eur is added to the above sum, the deposit amounts to 3.92 mil.eur.
Local self-government has realized deficit to the amount of 0.69 mil.eur,
which was financed by reduction of deposit to the amount of 2.06 mil eur
and net repayment of domestic credits to the amount of 1.43 mil.eur.
2. BUDGET OF THE REPUBLIC OF MONTENEGRO
Current revenues of the Budget of the Republic of Montenegro in
the first quarter of 2006 amounted to 102.88 mil. eur, representing an
increase by 16,54 % as compared to those planned for the same period.
As compared to the same period in 2005, the current revenues are higher
by 42,65 %.
Revenues realized in the first quarter are higher than those planned,
providing conditions for budget execution as planned, provided that
planned dynamics of increase is realized by the end of current year.
Positive trend was particularly achieved with respect to the following
types of revenues:
Corporate Income Tax is higher by 1,77 mil. eur, or 89,05 % as
compared to the plan for the same period,
Real Estate & Rights Transfer Tax is higher by 0,3 mil. eur, or
52,33 % as compared to the plan for the same period,
Value Added Tax is higher by 13,51 mil. eur, or 36,05 % as compared
to the plan for the same period in 2006, which is in line with
increasing trend in collection of this type of tax,
International Trade and Transactions Tax is higher by 2,19
mil. eur, or 28,09 % as compared to the plan for the 1 st quarter of
2006.
Expenditures of the Budget of the Republic of Montenegro for the
period from January to March 2006, are executed to the amount of
109.10 mil. eur, being lower by 22.04 % than expenditures planned for
the 1 st quarter of 2006.
The following Table shows a comparative review of receipts and
expenditures of the Budget of the Republic of Montenegro realized in
the 1 st quarter of 2006.
3. PENSION AND DISABILITY INSURANCE FUND
Review of receipts and expenditures realized by the Pension and
Disability Insurance Fund in the 1 st quarter of 2006 is given in the following
Table:
Current revenues of the Pension and Disability Insurance Fund are
realized to the amount of 26,57 mil. eur, being lower than planned by
4,13 mil. eur. In the first quarter of 2006, contributions were collected
to the amount of 26,26 mil. eur, being lower than planned by 4,24 mil.
eur. Transfers from budget amounted to 13,14 mil. eur, being lower than
planned ones by 4,19 mil eur.
Total spending by the Pension and Disability Insurance Fund
amounts to 40,72 mil. eur, being lower than planned by 7,31 mil. eur,
mainly due to the Fund’s incapability to fully meet its liabilities to the
Health Insurance Fund with respect to the health care of pensioners.
Deficit of the Pension and Disability Insurance Fund amounted to 0,63
mil. eur.
4. REPUBLIC HEALTH INSURANCE FUND
Total revenues realized by the Health Insurance Fund amounted to
17,59 mil. eur, which is lower than planned by 1.77 mil. eur. Revenues
from contributions amount to 16.20 mil. eur, being lower than planned
by 2.96 mil.eur, while received transfers amount to 4,73 mil. eur, being
lower than planned by 3.86 mil.eur.
Review of revenues and expenditures of the Health Insurance Fund in
the period from January to March 2006 is given in the following Table:
5. EMPLOYMENT AGENCY OF MONTENEGRO
Total receipts of the Employment Agency of Montenegro amounted
to 9.07 mil. eur, being higher than planned by 57.10% mil. eur. Revenues
from contributions amount to 1.08 mil. eur, being lower than planned
43

Macrofiscal report
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
44

Macrofiscal report
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
45

Macrofiscal report
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
by 18.05 %. Other revenues amount to 2.32
mil.eur, out of which 2.22 mil.eur is related
to enforcement of claims from the previous
year and 0.09 mil.eur is related to yield on
capital. Received transfers amount to 1.39
mil.eur mil. eur, being in line with the plan
for the 1 st quarter of 2006. The Agency made
a surplus to the amount of .50 mil. eur,
which, together with revenues from the sale
of property amounting to 0.42 mil.eur, led to
increase of deposit to the amount of 3.92
mil.eur.
Review of receipts and expenditures of
the Employment Agency of Montenegro in
the 1 st quarter of 2006 is given in the following
Table:
6. LOCAL SELF-GOVERNMENT
Current revenues of the local self-government
amounted to 15.22 mil.eur, in the
first quarter of 2006, being lower by 13.84 %
than planned for the first quarter of 2006.
Current expenditures amounted to 16.10
mil.eur, being lower by 10.94% than
planned for the first quarter of 2006. Thus,
the deficit was realized to the amount of
0.69 mil.eur, which was financed by reduction
of deposit.
7. INDUSTRIAL PRODUCTION
Industrial production in Montenegro in
March this year has been increased according
46

Macrofiscal report
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
to all indicators as follows: comparing to
average production per month as of last year-
6,8%; comparing to previous month of this
year - 11,3%; comparing to the same month
of the last year - 3,0% and for the period
from January to March this year as compared
to the same period last year - 4,4%.
9. COST OF LIVING
8. RETAIL PRICES
Retail prices in the Republic of
Montenegro in March 2006 were only higher
by 0,1% as compared to February.
Retail prices’ rate of growth in March
2006 was higher by 0,5% as compared to
December, or inflation for the first three
months this year is only 0,5%.
Increase of retail prices of items and services
for personal consumption i.e. living costs
in March 2006 was higher by 0,2% as compared
to February.
10. EARNINGS
Average earnings in March 2006 in
Montenegro amounted to EUR 362,93, while
average earnings without taxes and contributions
amounted to EUR235,63.
As compared to February, average earnings
without taxes and contributions were
47

Macrofiscal report
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006
increased in March by 2,32%.
Given the fact that the living costs in
March this year were increased by 0,2% as
compared to February, real earnings in our
Republic were increased by 2,12% in March
this year.
CONCLUDING REMARKS
Public spending in the first quarter of
2006 was realized to the amount of 174,13
mil. eur, being lower than planned by 17 %.
Deficit of public spending in the first
quarter of 2006 was realized to the amount
of 1.99 mil. eur, being lower than planned, as
follows: Government Budget- 5,49 mil eur;
Pension and Disability Insurance Fund- 0,63
mil. eur; Health Insurance Fund- 0,46 mil.
eur; and local self-government - 0,69 mil. eur.
Employment Agency made a surplus to the
amount of 3,50 mil. eur.
Consolidated public spending in the first
quarter of 2006 was realized to the amount
of 174,13 mil. eur, and was financed from:
taxes to the amount of 103,00 mil. eur; contributions
to the amount of 43,55 mil. eur;
stamp duties and fees to the amount of 4,81
mil. eur; charges to the amount of 6,00 mil.
eur; and other revenues (including receipts
from loan repayment) to the amount of
14,78 mil. eur. Realized revenues as compared
to planned amounts show that in the first
quarter of 2006, revenues from taxes, stamp
duties and fees and receipts from loan repayment
and funds transferred from the preceding
year were higher than planned, while revenues
from contributions and charges as well
as other revenues were lower than planned.
High level of tax revenues is based on value
added tax, corporate income tax and customs
duties collection.
Macroeconomic developments in the
first quarter of 2006 have positive trend.
Industrial production for the period from
January to March 2006 is higher by 4,4% as
compared to the same period in 2005.
Cumulative growth rate of retail prices is
higher by 2,5% in the period from January-
March 2006 as compared to the same period
last year. Living costs in February 2006 are
increased by 2,9% as compared to same
month in 2005. As living costs were increased
by 0,3% in February 2006 as compared to the
previous month, real earnings in
Montenegro were increased by 11,87% in
February 2006.
The Ministry of Finance will undertake
measures for efficient collection of public revenues,
particularly with respect to personal
income tax and customs duties, as well as for
a more regular payment of transfers in the
public spending system.
48