Bulletin - Vlada Crne Gore

• BulletinIV 

• April - June 2006

REPUBLIC OF MONTENEGRO 

MINISTRY OF FINANCE 

BULLETIN IV 

APRIL - JUNE 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/APRIL - JUNE 2006 


4-5 

INTRODUCTION 

- Igor Lukšić, PhD, Minister of Finance 

6-9 

LAW ON PROPERTY-LEGAL RELATIONS 

- Assistant to the Minister of Finance, Krsto Racković 

10-12 

LAW ON STATE PROPERTY 

- Milodarka Novosel, Senior advisor 

13-14 

RESTITUTION 

- Đorđina Lakić, Director of the Compensation Fund 

15 

BY RESTITUTION BONDS TO THE STATE PROPERTY 

- Assistant to the Minister of Finance, Krsto Racković 

16-17 

LAW ON TAX ADVISORS 

- Koviljka Mihailović, Assistant Minister of Finance, - Antoaneta 

Krivokapić - Senior advisor 

18-23 

PROCEDURES IN THE TAX PROCEDURE 

- Chief of the Department for the Second Instance Administrative 

and Customs Procedure, Pero Mrdak 

2



24-25 

PROJECT "1000 HOUSING LOANS " 

- Senior Employee, Dragan Darmanović 

26-28 

INTERNATIONAL COOPERATION - EBRD 

- Jadranka Radunović, International Co-operation and 

EU Integrations Department, Co-ordinator 

29 

30-31 

32-33 

34-35 

36 

37-39 

40-48 

TRANSFER OF THE ARMY PROPERTY 

TO THE REPUBLIC OF MONTENEGRO 

- Predrag Stamatović, Advisor to the Minister 

SUPPORT TO REFORM PROCESSES 

OF THE DEFENCE SYSTEM 

- Mijajlo Savović, M.A., Advisor for the Defence Budget 

in the Ministry of Finance 

OVERVIEW OF THE ACTIVITIES OF THE MINISTER OF 

FINANCE - PR SERVICE OF THE MINISTRY 

- Ana Miljanić, Spokesperson, Maja Bašić, Senior Employee I 

OVERVIEW OF OTHER NEWS 

- PR SERVICE 

OLD FOREIGN CURRENCY SAVINGS 

REPORT ON ACCOUNT OF PUBLIC DEBT OF THE 

REPUBLIC OF MONTENEGRO UP TO 30. JUNE 2006 

- Department for Debt and Cash Management, 

Indebtedness Analysis and International Co-Operation 

SneŽana Ivanović, Mersija Purišić, Mina Jovović, Nikola 

Vukićević 

16. MACROECONOMIC ANALYSIS 

- Stanko Jeknić, PhD, Co-ordinator of the Macroeconomic 

Analysis and International Co-Operation Department, 

Vladislav Karadžić, Senior Employee I, Macroeconomic 

Anaysis and International Co-Operation Department 

Bulletin of the Ministry of Finance 

April - June 2006 

NUMBER: 

4 

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., Krsto Racković 

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: 

400 

3

Introduction 


Minister of Finance 

IGOR LUKŠIĆ, PH.D. 

CONTACT: 

PHONE: 

+381 81 242-835 

FAX: 

+381 81 224 450 

E-MAIL: 

mf@mn.yu 

WEB: 

www.ministarstvo-finansija.vlada.cg.yu 

INTRODUCTION 

DEAR READERS, 

Successfully conducted Referendum on Independence, then very fast international 

recognition of Montenegro, and express membership in the 

United Nations Organization, represent the beginning of the new political 

period of Montenegro. Democratic consolidation of the system, which 

will progress through parliamentary elections and the draft of the new Constitution, 

creates conditions for economic positioning of our country in a new 

context. 

Taking over of the full responsibility 

for implementation of economic 

policy, and the participation in full capacity 

in the integration processes, 

should give a strong impetus to the 

economic growth and development 

in medium and long term. Recent 

continuation of negotiations on Montenegro's 

membership in the World 

Trade Organization, then expected 

new mandate for negotiations with 

European Commission on Stabilisation 

and Association Agreement, and 

recently ended Mission of IMF on the 

subject of medium-term macroeconomic 

policy and structural reforms, represent 

and will represent positive 

signal, first of all to foreign but undoubtedly 

to domestic investors too. 

Stability of the system and predictable 

economic policy are of great importance 

for business planning. If we 

add to that reform of property laws, 

chances for higher investments and 

therefore an opening of new job vacancies, 

become more certain. 

In this respect, it is necessary to 

start preparation of specific Agenda 

2010, or activities as a follow-up of 

economic reforms conducted in the 

period 2002-2006. Achieved macroeconomic 

stability, high percentage of 

privatised public capital, and legal 

4

Introduction 


Ministy of Finance 

grounds in many areas, represent specific 

platform for further transformation 

and modernization of Montenegrin 

economy and society. Combination 

of structural reforms together 

with control of public spending and 

reduction of tax rates represent policy 

which should additionally stimulate 

economic freedom, but also make 

easier the exchange of property 

rights with lower transaction costs. 

Main structural reforms are reflected 

in the continuation of privatization, 

and enabling of long-term concessions 

with business systems such as: 

Electric Power Company, Port of Bar, 

Airports or Montenegro Airlines, and 

in next phase of pension reforms, introduction 

of II pillar or individual capitalized 

savings. Particularly sensitive, 

but unavoidable reform in that 

context is a reform of labour market, 

through its liberalization. Falling 

trend of unemployment is obvious, 

and soon it will fall under 16%, but 

that is still very high level which is not 

possible to be reduced with the liberalization 

of labour legislation. At the 

same time, in combination with gradual 

reduction of income tax to the 

level of 9%, terms are created for the 

largest share of grey economy to be 

introduced into the real sector. 

In that context, the main challenge 

for public finance will be the public 

debt policy of general public sector, 

which should until 2011 be reduced 

below 30%. That kind of policy for 

public debt would create conditions 

for growth of state credit rating, reducing 

the risk premium in Montenegro. 

That implies the fall of interest rates, 

and therefore has positive influence 

not only to business, but also 

to the living standard of all citizens 

who are referred to the banking sector, 

allowing a wider range of possibilities 

to them. At the same, with the reduction 

of public debt, tax and privatisation 

receipts are allocated more 

dynamically to the development of 

infrastructure and therefore to achieving 

a high economic growth rate in 

the long-term. 

Sincerely, 

Igor Luksić, PhD 

5

Law on property-legal relations to be adopted soon 


LAW ON PROPERTY 

- LEGAL RELATIONS TO BE 

ADOPTED SOON 

THE PROPERTY LAW MUST TAKE HOLD IN ORDER TO BECOME THE RIGHT OF PRACTICE. 

EVERY NEW TIME REQUIRES ALSO NEW SOLUTIONS. WE ARE SURE THAT THIS LAW'S DIREC- 

TION IS TOWARDS THE NEW TIMES 

The Ministry of Finance through relevant Work 

Group composed of the representatives of the 

Faculty of Law, Ministry of Finance and Ministry of 

Justice managed by Prof. Dr. Zoran Rašović, prepared 

Draft Law on Property -Legal Relations 

Property -legal relations in Montenegro have not been 

still regulated integrally by the law. Property, as entirety of 

economic relations in society and social condition of 

existence, is fundamental base for the overall social reform. 

Complete and entire normative regulation of property-legal 

relations is necessary for implementation of 

the initiated changes in th economic and legal system of 

the Republic and it is an important condition for faster 

realization of constitutional concept of private property 

and freedom of entrepreneurship. 

Subject-matter of the property-legal relations is regula- 

ted by the Law on Elements of property-legal relations 

and numerous separate laws (tenant ownership, mortgage, 

pledge, fiduciary transfer of property rights etc.). To 

the extent to which they are still not regulated by the new 

regulations, pre-war legal rules can still be applied to these 

relations, under the general conditions contained in 

the Law on Invalidated Legal Relations adopted before 

April 6, 1941 and During the Occupation Period in 1946. 

Drafting the Law on property-legal relations in Montenegro, 

subject-matter of the real right is gathered in one 

place. In that process were used past experinces, provisions 

of our big general property code of Montenegro, judicial 

practice, comparative legal decisions as well as decisions 

from the European law, expecially Convention on 

protection of fundamental human rights and freedoms as 

well as practice of the European Court of Justice. 

6



Assistant to the 

Minister of Finance 

Krsto Racković 

As it is known, according to earlier constitutional decisions, 

legislative competence for regulating property-legal 

relations was divided so that Federation regulated basic 

property-legal relations and other issues came within 

the competence of the Republics. Thus, the Law on Basic 

Property-Legal Relations in 1980 was adopted ("Official 

Gazette of the Socialistic Federal Republic of Yugoslavia", 

No. 6/80), which regulated: right to property (holders and 

facilities, acquiring, protection, discontinuation), real easement, 

mortgage (pledge o chattels is regulated by the 

Law on Obligatory Relations), possession actual, rights of 

foreign physical and legal persons and meritory right in 

case of inetrnal conflict of laws. Cetain issues from these 

fields, which are not included in this law as well as the other 

legal areas (co-ownership, joint ownership, tenant 

ownership, fiduciary ownership, shareholders ownership, 

personal easement and neighborly rights) were subject-matter 

of legal regulation of the republics and they 

are partially already regulated by certain separate laws. 

We can state that numerous property and other real-legal 

relations haven't been still regulated legally. 

By adoption of the Law on property-legal relations, 

Montenegro will entirely regulate the general legal system 

of issues and rights. The holders will be provided 

with these rights, in terms of the real rights, to the same 

extent as holders in other European states. 

The draft law mostly assumed provisions from the former 

federal law. Thus, along with additional regulation of 

unregulated relations, a single, consistent and entire text 

on property-legal relations was offered. 

The past Law on Law on Basic Property-Legal Relations 

regulated certain institutes, but not comprehensively 

and entirely, leaving to the republican legislation to 

normatively regulate the remainder of relations and institutes. 

Now, these are completely regulated by the draft 

law, which contributes to codification requirements in 

certain areas of social relations. In that way complex institues, 

which came earlier within a divided legislative competence, 

are now integrated. Joint regulation of propertylegal 

relations has got all advantages in terms of complete 

regulation, good layout of decisions and their internal 

adjustment. Purpose-serving reasons also point to joint 

regulation of these issues. 

This draft law regulates also the assumed subject-matter 

about tenant ownership, fiduciary transfer of ownership 

rights and mortgage, what enables better adjustment 

and systematic quality of the legal text, facilitates 

the entire insight into the subject of regulation as well as 

regulation itself. As Prof. Dr. Zoran Rašović says, this codification 

proposal brings about deeper intervention in 

terms of the existing real right and at the same time 

brings together the existing real right, which was until 

now regulated by several laws, into one separate unity. 

Orientation of the proposer towards single integral method 

of regulation of these relations will contribute also to 

7



easier practical application of the law. 

Konstantinovic's model of legal norms formulation 

was mostly used in the course of drafting this law. The 

model is characterized by transparency, good layout and 

elegance of the legal text, and in this process were used 

the best experiences in comparative law adjusted to our 

reality and adjusted to the international standards in this 

field. 

In the course of drafting this law we transparently determined 

subjects, objects and principles of real rights as 

well as general principles on which they are based (definiteness, 

prohibition to abuse real rights, limitations of ownership 

rights etc.) Legal notion of ownership, social function 

of ownership, possibility and manner of ownership limitation 

are determined and other real rights are determined 

and defined (easement, real burden and pledge, ownership 

rights of the state etc.) The law also regulates the issues 

of acquiring and termination of the ownership rights 

on the basis of legal affairs, inheritance, decision of the public 

authority under the conditions determined by the law 

etc. Certain, so called original ways of acquiring ownership 

rights are separately regulated (non-owners' acquiring of 

ownership) such as creation of a new object, modification, 

unification, constructing at somebody else's land, longstanding 

plants, fruits separation, actual possession, acquiring 

from non-owners etc. then occupation, planting and 

sowing at somebody else's land, reclaimed piece of land, 

deposit, river flow alteration, abandoned river bed, new river 

island, swarm of bees etc. 

The law separately regulates the issues of co-ownership 

rights, rights of joint ownership and tenant ownership. 

Of course, easement rights, personal easement and 

neghborly rights are also regulated in a relevant manner. 

Right to pledge, as right of creditors (pledge or mortgage 

creditor and pledgee) to enforce their claims before 

all the other creditors, is also regulated by this law. 

Because of uniqueness of regulating all the property 

relations there is, of course, also fiduciary ownership, i.e. 

fiduciary transfer of ownership rights, what was until 

now regulated by a separate law. 

Easement, as factual ownership of objects, is also regulated 

by this law. 

This law separately regulates also issues of foreign 

persons rights in terms of acquiring ownership rights to 

movable and immovable objects. These issues are particularly 

significant from the aspect of privatization and foreign 

investments, i.e. possibility that foreign legal and 

physical persons invest their capital without being disturbed. 

In relation to the existing decisions from the mentioned 

federal law, decisions in this law in this area, are significantly 

more liberal and the rights of foreign physical 

and legal persons to acquire real estate in Montenegro, 

along with existence of reciprocity, are equalized with 

the rights of our citizens. 

Special significance and quality of this law in terms of 

establishment of clear ownership relations and determination 

of titular of ownership, i.e. elimination of quasiownership 

terms of reference from the legal system as 

well as terms such as "usage", "permanent usage" and other 

relapses of social ownership, is contained in transitional 

and final provisions of this law. Namely, separate 

articles regulate the issue of ownership rights transfer 

from social ownership and registration of real owners' 

ownership right. Thus, real legal institutes of ownership 

are established and outdated terms of ownership rights, 

especially in the framework of construction land are eliminated 

from the real estate register. Exactly that undefined 

land ownership caused significant difficulties and 

problems in transition in the past period, in particular in 

the privatization procedure of economic associations or 

parts of their property. 

Constitutionally guaranteed full ownership rights of 

all entities - holders of ownership rights, starting from citizens 

to economic associations and local governance 

will be established by enforcement of this law in the part 

of transitional and final provisions. Therefore, two constitutionally 

guaranteed forms of ownership, private and 

state, with full capacities of disposal and enjoyment of 

ownership rights will play a role. 

Prototype of this decision can be found in the Law on 

Restitution of Dispossessed Ownership Rights and Indemnification 

("Official Gazette of the RoM", No. 21/04) 

by which the unjustifiably dispossessed property within 

the construction land is not returned to the former owners 

for usage but as their ownership. 

As it is known, in the first years after the World War II 

radical measures of disempowerment of the owners of 

production instruments in Yugoslavia were carried out on 

the basis of confiscation of property, regulation on agrarian 

reform and nationalization of priovate and economic 

enterprizes, buildings, construction land and other regulations 

on ownership right disempowerment and its transfer 

to social, i.e. national ownership. Socialization of construction 

land is continued because according to the Constitution 

of SFRY from 1974 private ownership right to 

construction land in the towns and populated places as 

well as in the other areas envisaged for housing and other 

complex constructions was not allowed. 

Constitution of the Republic of Montenegro from 

1992 terminated social ownership and established single 

8



ownership system, which guarantees right to ownership 

and inheritance without any limitations. Inviolability of 

the ownership right is raised to the level of the highest values 

of the constitutional order. However, although social 

ownership is terminated, in the legal system of the Republic 

of Montenegro remained "right to usage" of construction 

land by the owner of construction facility as a real relict 

of outdated relations. Therefore, there is an illogical 

combination in the cadastar registars, i.e. citizen who is 

the owner of construction facility (family housing building, 

business premises etc., which he constructed in accordance 

with the legal procedure) is not the owner, but 

only user of the construction land, i.e. construction lot on 

which the facility is built. Everyday practice derogates 

each day these legal illogicalities and gradually introduces 

universal legal principles, which are appropriate to 

the European standards, and which are based on full disposal 

of property and even construction land of the holders, 

who acwquired thier rights in the legal procedure. 

As Prof. Rašović points out, exactly the illogicallity 

must be resolved by adopting the Law on Property-Legal 

Relations in the aforesaid manner, by registering the 

ownership right to the past holders of "right to usage", 

"permanent usage", possibly "management" etc. 

By adoption of the set of other laws in the field of property 

(Law on State Property, Amendments and Supplemnts 

to the Law on Construction Land and Law on 

State survey and real estate cadastre) which are envisaged 

by the Agenda of the Government of the Republic of 

Montenegro in the first half od 2006 , and which were being 

adjusted during thier drafting and now make a complementary 

and compatible entirety, the overall subjectmatter 

of this sphere in Montenegro will be regulated in 

a completely new and modern way, relevant to the European 

standards. Clear and adequate legal institutes of 

ownership, disposal and possibility of property transactions, 

which are relevant to the rights of entities that are 

holders of ownership rights in the modern world, are established 

in that way. 

On these principles, from the Draft Law on Property- 

Legal Relations the Ministry of Finance prepared a completely 

new version of the Law on State Property, with 

ambition to perform further diferentiation in the framework 

of property rights and authorizations in relation to 

state property with clearly defined ownership position 

and authorizations of municipality (separate attachment 

in this bulletin). 

On the basis of the mentioned principles, from the 

Draft Law on Property-Legal Relations and Draft Law on 

State Property, in the ownership registers, i.e. register of 

real estate the ownership rights, which remined undefined 

until now (usage, permanent usage etc.), which were 

acquired in a legally valid manner, at the request of 

owners of these rights would be registered as the ownershp 

right. In addition, on the basis of the mentioned legal 

principles real titulars of private and state property 

will be determined and protected, and clear diferentiation 

of ownership rights and obligations of municipality 

will be executed in the framework of state property. 

By amendments and supplements to the Law on Construction 

Land, with much more clear and modern decisions, 

the procedures of overall treatment of property of 

the ownership rights holder in the framework of construction 

land will be integrated and simplified and the 

holder's rights and obligations will be regulated in a new, 

quality manner. 

In that way, the legislative framework would be integrated 

and real property-legal relations and all actions 

and procedures with reference to the property of the 

ownership rights holder would be completely established. 

By adoption of the Law on Property-Legal Relations 

Montenegro will obtain a new system of property-legal 

relations, i.e. real rights. Property-legal relations are in 

every country a foundation of legal relations in general. 

That is why drafting of this law implied good knowledge 

about the past legal system (regulations, judicial practice, 

legal theory). Preparation of such a comprehensive law 

in the filed of property-legal relations at the moment 

when the system goes through a significant turn and the 

need to resolve many relations, which occurred in the 

meantime and which are resolved through the judicial or 

extra-judicial procedures, represented a really great challenge. 

This law creates prerequisites, resolutions to many various 

relations established by physical and legal persons. 

It is expected that iots resolutions would be inspirative 

for judicial and other practice, for legal theory and comparative 

legal studies, in which process the property Codex 

of Montenegro is a big step forward towards the legal 

partnership with the European Union. 

Finally, as Prof. Rašović would say - adoption of the property 

codex belongs to big state issues. The property 

law must take hold in order to become the right of practice. 

Every new time requires also new solutions. We are 

sure that this law's direction is towards the new times. 

KRSTO RACKOVIĆ, 

Assistant to the Minister of Finance 

9

New draft Law on state property 


NEW 

DRAFT 

LAW ON 

STATE 

PROPERTY 

Senior Advisors 

Milodarka Novosel 

STATE OF AFFAIRS 

Ministry of Finance, in cooperation 

with the Ministry 

of Justice, Ministry of Environment 

and Physical Planning and 

Real Estate Administration, has drafted 

a new Law on State Property and has 

sent it to the Government working 

groups for a related procedure. 

Legal standards governing the property 

and property rights have been 

completed by drafting this Law, together 

with other regulations in this field. 

For a better understanding of this 

field as well as importance of the suggested 

solutions for the legal system of 

the Republic of Montenegro, it is necessary 

to point to the following: 

Conditions and procedure for sale 

of property located on agricultural, 

building and forest land, or in structures 

or buildings were defined under 

the Law on Sale of Property ("Official 

Gazette of the SR of Montenegro", No. 

27/75), which was subsequently amended 

in 1989, 1991, 1992 and 1994. Certain 

provisions of this Law are still applicable. 

The provisions under this Law stipulate 

that the property is of public 

use, while organizations of associated 

labour, self-governing communities of 

interest, socio-political communities, 

local communities and other self-managing 

organizations and communities 

or social legal persons are holders 

of right of use with respect to sociallyowned 

property. 

For example, in case of alienation 

of the structures or buildings, with respect 

to which a right of use exists, a 

right to a land appurtenant to such 

building is also transferred, including 

a land serving for a regular use, and a 

10



new owner acquires a right of ownership 

with respect to the building, while 

with respect to socially-owned land, 

a right of use is acquired as long as the 

building is located on such land. 

Rights and obligations of state authorities 

with respect to the property 

management were defined under a separate 

Law on Rights and Obligations 

of Socio-Political Communities' Organs 

with respect to Socially-Owned 

Resources used by them ("Official Gazette 

of SR of Montenegro", No. 21/84). 

Accordingly, the said laws governed 

the rights for socially-owned movable 

and immovable property management 

in the Socialist Republic of 

Montenegro. 

For the ex Yugoslav countries as 

well as for other socialist countries, the 

reforms in the field of property rights 

and related authorizations are essential 

in their process of transition. Namely, 

as it can be seen from the said 

laws, all movable and immovable property 

was socially-owned, with no 

clear rightful claimant, meaning "common 

property equals nobody's responsibility". 

Reforms in the transition process 

are aimed at designating a clear rightful 

claimant with respect to property 

management, thus protecting the property 

from usurpation, allowing it to 

be privatized and valorized through 

various types of the receipts stemming 

from the property. 

Republic of Montenegro adopted a 

new Law on Property of the Republic 

of Montenegro ("Official Gazette of 

RoM", No. 44/99). The objective of this 

Law was to remove all dilemmas relating 

to the former system and sociallyowned 

property. However, it was not 

done adequately. Namely, the Law has 

not been sufficiently implemented, 

mainly due to the fact that many issues, 

which were to be clearly defined, 

remained in general and imprecise 

terms, resulting in non-adoption of relevant 

by-laws provided for under the 

Law. 

Besides, there were certain legal 

oversights in this field, such as the provisions 

of the Law on Education, according 

to which the Ministry of Education 

is entitled to the state property 

management; Law on Tourism which 

empowered municipalities to manage 

the state property (mineral waters, 

which is contrary to the basic right that 

may be exercised with respect to the 

state property) etc. 

Such inappropriate legal solutions 

also caused problems in the privatization 

of certain public enterprises (a facility 

in the ownership, land for use); 

unclear registration of the property in 

the Real Estate Register as well as an incorrect 

registration of the state property 

belonging to the Republic in favour 

of a municipality; irregularities with 

health, education and cultural institutions, 

etc. 

Following adoption of this Law, in 

line with the set developmental goals, 

the reforms were launched in many 

areas, particularly in the field of public 

administration, local self-government, 

budget, public prosecutor's office etc. 

Relevant legal regulations were adopted 

to this end, such as Law on Budget 

("Official Gazette of RoM", No. 40/01), 

Law on Local Self-Government ("Official 

Gazette of RoM", No. 42/03), Law 

on State Audit Institution ("Official Gazette 

of RoM ", No. 28/04), Law on 

Chief Prosecutor ("Official Gazette of 

RoM ", No. 40/01), as well as many other 

laws that the Law on Property of 

the Republic of Montenegro has to be 

harmonized with. 

All listed arguments as well as a need 

for drafting simpler and more precise 

legal solutions required drafting 

of a new law governing the state property 

issues. 

AN OBJECTIVE SET 

WHILE DRAFTING THE 

NEW LAW ON STATE 

PROPERTY 

While defining certain solutions in 

the Draft Law on State Property, main 

intention was to define all terms in this 

field and determine clear authorizations 

with respect to right to the state 

property management, running, 

using, exchange etc, and to ensure recording 

and assessment of the state property 

and establish relevant authorities 

which will be responsible for management 

and protection of the said 

property (a State Property Authority 

and an Inspector for the State Property). 

While drafting the Law, opinions of 

all relevant institutions in the Republic 

were taken into account, such as competent 

ministries, Secretariat for Legislation, 

State Audit Institution, all municipalities 

in the Republic and union of 

municipalities, state Funds etc. Experiences 

and certain solutions were also 

provided from ex Yugoslav republics 

and foreign consultants, such as Barents 

and its institutions, which were 

very useful in making the final text version 

of the Draft Law. 

MAIN PURPOSE OF 

THE LAW 

Drafting process of the Law on State 

Property started from the following 

facts: 

- That the state property represents 

a direct and most comprehensive 

legal power of the state, or its authorities, 

organizations and services 

with respect to the material property. 

In terms of a civil law, a state is a holder 

or bearer of the most comprehensive 

power over the objects like other 

legal entities (natural and legal persons). 

In terms of a public law, a state 

property is a set of public law authorizations 

and obligations that a state has 

with respect to public property, and 

accordingly it is a holder of power 

(imperium). A state property entity is 

a state as a collective or as an entity 

that has a sovereign management over 

the public property by means of public 

law or civil law enactments. These 

are state authorities, local self-government 

units (municipalities) and public 

services. The Constitution of the 

Republic of Montenegro guarantees a 

right of ownership to natural and legal 

11



Waters etc. ). 

PENAL, TRANSITIONAL 

AND FINAL PROVISIONS 

persons and its inviolability. This rule 

is also applicable to a private and public 

property; 

- According to the provisions under 

the Draft Law, property rights and 

authorizations with respect to the state 

property are exercised by the Government 

of the Republic of Montenegro, 

or a local self-government authority 

designated under the Statute of the 

municipality. Government or a competent 

local self-government authority 

decides on the state property management, 

unless otherwise provided for 

under the law. 

Therefore, state of Montenegro is a 

holder or bearer of the most comprehensive 

legal power over the stateowned 

property. State property entities 

have ownership powers over such 

property, including state-owned building 

land. 

In the context of given solutions, 

the Draft Law clearly defines or delineates 

the state property over which the 

Republic or a municipality respectively 

exercises ownership rights or authorizations. 

The Draft Law also clearly distinguishes 

a state property serving for 

functioning of the Republic or its 

agencies and public services on one 

hand, and for functioning of a municipality, 

or its authorities and public services 

on the other, clearly defining the 

state property which represents a 

common good (recourses of common 

interest and use). 

The Draft Law clearly defines the 

terms relating to the state property 

management, use and running, clarifying 

their respective meanings. 

We particularly emphasize that the 

Draft Law governs a procedure related 

to recording of the state property and 

establishing of a Register. Special obligation 

and responsibility to this end is 

given to the competent Republic and 

municipal authorities using and supervising 

the state property (state property 

which is governed by separate laws, 

such as Law on Coastal Management, 

Law on Roads, Law on Forests, Law on 

In case of non-implementation of 

the provisions under the Law, penal 

provisions shall apply to the state authorities, 

municipal authorities and public 

services as well as to responsible 

persons in a state authority or a municipal 

authority failing to manage the 

state property in conformity with the 

Law 

With a view to removing dilemmas 

and illogicalities caused by the previous 

registration of rights of use or permanent 

use of a building land in the 

cadastre, transitional and final provisions 

stipulate that such rights shall be 

changed into a right of ownership of 

the Republic or local self-government 

unit, unless an interested entity proves 

that it acquired a right of ownership 

over certain land by means of a valid 

legal transaction 

The Draft Law also stipulates that 

the following laws shall not remain in 

force: Law on the Property of the Republic 

of Montenegro; Law on Sale of 

Property; Article 15a of the Law on 

Education, and Article 53, paragraph 6 

of the Law on Tourism. 

Establishing of an authority responsible 

for property, introduction of 

the state property Register and assessment 

of the state property as new solutions 

relevant for this field deserve 

to be separately discussed in a next issue 

of the Bulletin. 

Senior Advisor 

MILODARKA NOVOSEL 

12

Restitution 


RESTITUTION 

LEGAL FOUNDATION FOR RESTITU- 

TION AND COMPENSATION OF FOR- 

MER HOLDERS FOR THE PROPERTY 

RIGHTS EXPROPRIATED IN FAVOUR 

OF NATIONAL WIDE, NATIONAL, PU- 

BLIC AND COMMON PROPERTY IS 

CONTAINED IN THE LAW ON RESTI- 

TUTION OF EXPROPRIATED PRO- 

PERTY RIGHTS AND COMPENSA- 

TION ("OFFICIAL GAZETTE ROM", 

NO.21/04), WHICH ENTERED INTO 

FORCE ON 9TH APRIL 2004. 

Director of the Compensation fund 

Đorđina Lakić 

According to the provisions of the Law, former 

holders have right to demand restitution 

or compensation, if their property 

rights were expropriated in favour of national wide, 

national, public or common property, without just or 

market compensation. In the settlement of matters 

that are subject of this Law, provisions of the Law, 

which regulate property-legal relations, debenture 

and other relations shall be applied if they are in accordance 

with this Law. In the procedures for exercising 

rights by this Law, the Law on General Administrative 

Procedure is applied. 

13

Restitution 

BILTEN Ministarstva finansija Crne Gore/april-jun 2006. 

Gaining of property rights for real estate and other 

property rights, or reimbursement realised according 

to this Law is not a subject to tax payment. 

Persons under obligation of restitution of objects 

and rights are natural and legal persons who are their 

owners at the moment of the entering into force of the 

Law, except in cases when those persons gained property 

right in accordance to the Law. Republic of Montenegro 

is under obligation of restitution of former 

holders and it will provide funds for the Compensation 

Fund. Therefore, former holder has right for compensation 

in case when expropriated objects and 

rights are not object of restitution. 

Practical application of the Law started with formation 

of the Municipal Commissions for Restitution and 

Compensation, and in the second half of 2005, first 

restitution of expropriated property started. Finally, 

first payments were made by way of compensation of 

former holders or their successors in November 2005. 

were issued by way of compensation of former holders 

in bonds to total amount of 3.684.075,00 EUR. 

Until now 658.350,00 EUR has been realised through 

the exchange market. 

Compensation Fund makes payments, according 

to provisions of the Article 22 of the Law on Restitution 

of Property Rights and Compensation, every six 

months according to the available funds until their final 

payment. 

Payments upon decisions refer to the expropriated 

property rights of former holder, but in most cases 

compensation is paid to the successors on which the 

total amount is divided, on six-month instalments. 

By now, 53 valid and enforceable decisions, whose 

total value is 9.530.388,66 EUR were delivered to the 

Compensation Fund, by Municipal Commissions for 

Restitution and Compensation. 

First payments of the compensation started year 

and a half after the day of enactment of the Law, which 

is significantly shorter period when compared to 

countries in the region, which even initiated restitution 

process several years ago. In those countries the 

procedure is still not over, and payment of the compensation 

in bonds started only after four years and 

more from the enactment of the Law on Restitution. 

(Slovenia 1992, Macedonia 1996, et al.). 

With the enactment of the Decree on Bond Issue 

Method and the Procedure of Exercising of Rights for 

Reimbursement of Former Holders and Decision on 

Bonds Issue of the Republic of Montenegro Based on 

the compensation of former holders, conditions were 

met for compensation to be performed also in bonds. 

Bonds can be sold or used for purchase of stocks, 

shares and other property of the Republic of Montenegro 

and state funds, in accordance to the regulations 

on privatisation. Trade with bonds on the market 

is performed according to the regulations that regulate 

securities trading, or at the exchange market, through 

authorised participant in the equity market. 

According to the provisions of the Article 25 of the 

Law and the Decision on Bond Issue, 28 certificates 

Decisions were delivered by following municipal 

commissions: Podgorica (5), Budva(1), Cetinje(2), Nikšić(9), 

Pljevlja (29), Danilovgrad (4) and Bijelo Polje 

(3). 

Upon all decisions that came in first six-months instalment 

was paid to the total amount of 527.259,05 

EUR. 

Upon all individual decisions during 2006, payment 

of the second and third six-month instalment 

matures. 

Deadline for submission of claims of former holders 

for restitution of expropriated property has expired 

in all commissions except in Commission Kotor (it 

expires at the beginning of 2007), and in Žabljak the 

Commission still has not been formed. 

Director of the Compensation Fund 

ĐORĐINA LAKIĆ 

14

By restitution bonds to the state property 


BY RESTITUTION BONDS 

TO THE STATE PROPERTY 

Goverment of the Republic of Montenegro 

Government of the Republic of Montenegro at its session 

dated June 20, 2006, made a Decision on 

Amendments and supplements to the Decision on 

Conditions and Procedure of Purchase of the Property of 

the Republic of Montenegro by Bonds of Foreign Exchange 

Savings of the Citizens. The aforementioned changes of the 

existing decision enables purchasing of the state property - 

real estate by means of bonds of the Fund for Indemnification. 

By amendments to this legal act by means of bonds of 

the Fund for Indemnification it is possible to buy property 

of the Republic, which is determined by the Government for 

that purpose, equally as with the bonds of old foreign exchange 

savings. By enforcement of the mentioned amendments 

apart from shares of economic associations in the state 

property and property of state funds, it will be possible to 

buy certain real estate from the state property fund with the 

restitution bonds. 

In the essence, the amendments serve to completely 

equalize the bonds of the Fund for Indemnification in terms 

of possibility of their usage for purchase of shares and property 

of the state and state funds with the bonds of old foreign 

currency savings. 

On that occasion, along with amendments and supplements 

to the Decision the Ministry of Finance proposed an 

additional list of state property for this purpose, which will 

also be published in the "Official Gazette of the RoM". The 

list consists of one residential building in Bar, hotels "Šavnik" 

and "Boan", several business premises in Budva, Bijelo Polje, 

Nikšić, Šavnik, three premises in Podgorica, department 

store in Šavnik, house with a courtyard in Žabljak, facility for 

catering business in Plav etc. The extended list will also consist 

of a building in noneconomic business in Bijelo Polje. 

The list will be supplemented with new real estate, which 

will be proposed to the Government of the RoM by the Ministry 

of Finance. The practice will be continued and it will 

increase the offer to the owners of foreign exchange bonds 

and bonds of the Fund for Restitution, in order that they realize 

them before the time of their maturity. 

KRSTO RACKOVIĆ, 

Assistant to the Minister of Finance 

15

Contents of draft law on tax advisors 


CONTENTS OF DRAFT LAW 

ON TAX ADVISORS 

RATIONALE OF LAW 

Adoption of a separate Law on Tax Advisors is aimed at 

ensuring a more favourable environment and infrastructure 

required for efficient implementation of the tax and customs 

regulations in practice. Introduction of a tax advisor as 

an independent expert will allow the taxpayers to be advised 

about the tax and customs issues in a qualified and professional 

manner. The tax advisors shall be authorized to represent 

the taxpayers professionally before administrative 

authorities (Tax Administration, Customs Administration 

and Ministry of Finance) as well as before competent courts. 

Draft Law on Tax Advisors (hereinafter referred to as: 

Draft Law), which was drafted by the Ministry of Finance, 

has been placed at the Ministry's web site: www.ministarstvo-finansija.vlada.cg.yu, 

and all interested persons may 

send related remarks or suggestions. The Law is expected to 

be adopted in the Parliament by the end of 2006. 

WHAT IT TAKES TO BE A TAX ADVISOR 

According to the Draft Law, the tax advisory services 

may be provided by a natural person as an independent activity 

or a legal person (partnership) specialized in providing 

tax advisory services. A natural person who provides 

tax advisory services independently, may not be employed 

with another natural or legal person. 

The Draft Law defines general and special conditions to 

be met by a person who wants to become a certified tax advisor. 

General conditions to be met: a tax advisor shall (1) be a 

Montenegrin citizen; (2) have general physical and mental 

abilities and (3) have no criminal records that make him/her 

ineligible for doing the tax advisor's activities, such as criminal 

offence against: property; payment operations and commercial 

operations; state authorities; judiciary and legal duty, 

during the period of five years following validity of relevant 

court decree. 

Special conditions to be met: a tax advisor shall (1) be a 

graduate lawyer or economist; (2) have at least 10 years of 

working experience in tax or customs related assignments 

and (3) have passed an exam for becoming a tax advisor and 

have approval for work. 

In order to become a certified tax advisor, a person shall 

have to pass an exam for tax advisor. The exam shall be taken 

before a special commission to be established by the Ministry 

of Finance, which shall be composed of at least five 

members, half of them being from the Ministry of Finance, 

Tax and Customs Authority, while the other members shall 

be experts in economics and law theory and practice respectively. 

Exam for becoming a tax advisor shall be taken in compliance 

with a program to be recommended by the Chamber 

of Tax Advisors and adopted by the Ministry of Finance. 

A person taking the exam shall bear related expenses, while 

the amount shall be determined by the Ministry of Finance 

at the proposal of the Chamber. 

According to the Draft Law, the Ministry of Finance 

shall be authorized to issue a license for work to a certain 

number of recognized tax advisors (but not more than five) 

without taking a special exam. The above has been suggested 

for the purpose of speeding up the process of establishing 

a professional association (the Chamber), which 

requires recruitment of 10 tax advisors in order to become 

16

Contents of draft law on tax advisors 


Assistant Minister 

Koviljka Mihailović 


Antoaneta Krivokapić 

operational. 

The Chamber shall issue a license for work to a tax advisor, 

which shall be subject to renewal every five years. A tax 

advisor who has been engaged in tax or customs business 

over the last three years may not be awarded a contract on 

tax advisory services within a year from a date of obtaining 

the license. 

RIGHTS AND OBLIGATIONS 

OF TAX ADVISORS 

services. 

The Draft Law provides for liability insurance in case of 

possible damage caused to a client by a tax advisor or specialized 

partnership while discharging their duties. The lowest 

insurance rate per a tax advisor amounts 10.000,00 eur. 

State authorities and legal persons having public authority 

shall be obliged to provide a tax advisor with all information 

that he/she may require. 

JOINING THE CHAMBER 

According to the Draft Law, a tax advisor shall be authorized 

and obliged to represent taxpayers in line with the tax 

regulations and his/her personal principle. A tax advisor 

shall be obliged to abide by the principles of legality, scrupulousness, 

competence and professional code to be enacted 

by a competent Chamber. A written contract on tax advisor's 

services shall be concluded, while the provision of services 

shall be charged at a rate to be determined by the 

Chamber with prior approval from the Ministry of Finance. 

A tax advisor shall discharge his/her duties based on data 

and documents provided by a client with whom a contract 

is concluded. The tax advisor shall keep such data confidential. 

One or more tax advisors may establish a specialized association 

for tax advisory services (partnership). The Chamber 

shall give an approval for registration of such partnership 

into the relevant register of companies. All rights and 

obligations related to the tax advisors shall also apply to the 

partnerships for tax advisory services. Competent Chamber 

shall supervise the work of the partnership for tax advisory 

According to the Draft Law, tax advisors shall be obliged 

to join the professional Chamber (Chamber of Tax Advisors), 

being an independent and self-governing organization 

having a legal person capacity. The Chamber shall introduce 

tax advisors, promote their work and represent their 

common interests. The Chamber shall also be obliged to keep 

relevant registers (on passed exams, issued licenses 

etc).The Chamber shall, under its Statute, more precisely define 

issues related to its organization, membership fee and 

other issues relevant for its work. 

KOVILJKA MIHAILOVIĆ, 

Assistant Minister 

ANTOANETA KRIVOKAPIĆ, 


17

Procedures In the tax procedure 


PROCEDURES 

IN THE TAX PROCEDURE 

NORMATIVE DECISIONS 

• Law on Tax Administration (''Official Gazette of the 

RoM'', No. 65/01 and 80/04); 

- Regulations on Form and Contents of Statements of 

Witholding Taxes Payments (''Official Gazette of the RoM'', 

No. 31/02, 33/02 and 67/02); 

- Regulations on Criterion for Determination of Big 

Taxpayers (''Official Gazette of the RoM'', No. 16/05); 

- Decree on Level of Tax Obligations Enforcement 

(''Official Gazette of the RoM'', No. 24/05); 

- Regulations on Form and Contents of Registration 

Form for Taxpayers (''Official Gazette of the RoM'', No. 

24/05); 

- Regulations on Manner of Tax Base Determination by 

Means of Evaluation (''Official Gazette of the RoM'', No. 

36/05); 

- Regulations on the Manner of Sale of Taxpayer's Property 

in the Procedure of Enforcement of Claims (''Official 

Gazette of the RoM'', No. 36/05, 73/05 and 33/06); 

Subsidiary application of the following Laws: 

• Law on General Administrative Procedure (''Official 

Gazette of the RoM'', No. 60/03); 

• Law on Inspection Control (''Official Gazette of the 

RoM'', No. 39/03); 

• Law on Executive Procedure (''Official Gazette of the 

RoM'', No. 23/04); 

• Law on Mortgage (''Official Gazette of the RoM'', No. 

52/04); 

• Law on Pledge (''Official Gazette of the RoM'', No. 

38/02). 

BASIC CHARACTERISTICS 

OF THE LAW ON TAX 

ADMINISTRATION 

- Law on Tax Administration is based upon the positive 

experiences from the Anglo-Saxon and European Tax Legislation, 

as well as the legislations of certain countries in transition 

(countries of former Yugoslavia and Eastern European 

countries); 

Chief of the Department for the Second Instance 

Administrative and Customs Procedure 

- It represents a codification of legal standards (procedures), 

which regulate the procedure of determination, control 

and collection of taxes and other duties depending on the 

type of tax as well as other issues, which should have been 

regulated in a different manner than in the manner regulated 

by the general regulation due to their peculiarity; 

- Subsidiary application of the Law on General Administrative 

Procedure and the Law on Inspection Control is regulated 

for all the issues of procedure that have not been regulated 

by this law, while the instructing norm for application 

of the Law on Executive Procedure, Law on Mortgage or 

Law on Pledge is offered for certain issues; 

- Self-taxation is the basic principle in the procedure of 

determination and enforcement of taxes and other duties; 

- Assessment principle has been established as authorization 

and obligation of the tax authority in the situations 

when tax determination is not executed or incompletely or 

wrongly executed by the principle of self-taxation, or if it is 

regulated by the tax law. 

SELF-TAXATION 

IN THE TAX SYSTEM 

Pero Mrdak 

- Self-taxation is voluntary participation of a taxpayer in 

tax events in accordance with the tax laws; 

18



For implemetation of the system of self-taxation it is necessary: 

- To execute registration of taxpayer with the competent 

tax authority and assign him/her a tax identification number 

(TIN); 

- To provide that the taxpayer, tax authority and all the 

mediators in tax events to use the tax identification number 

in the way that TIM is filled in all the documents and it becomes 

the basic connection in relation to all taxpayer's transactions; 

- To publish all the laws and other tax regulations duly in 

the ''Official Gazette of the Republic of Montenegro''; 

- To produce and make available in due time and free of 

charge registration forms, tax returns, statements, records 

etc., as well as the instructions to fill in the same to taxpayers 

and tax mediators; 

- That taxpayer duly keeps business records, executes documentation 

composing in due time and provides other data 

and information, which he/she can use to calculate the tax 

obligation in accordance with the requests of the tax law; 

- That the taxpayer prepares and files a tax return in due 

time and accurately, without previous consultation with the 

tax authority; 

- That the taxpayer, according to his own initiative or initiative 

of tax authority, corrects in due time the incomplete 

or wrongly filled tax returns; 

- That the tax authority provides for a fair and impartial 

relation to all the taxpayers, treating the tax return data with 

full confidentiality, and keeps records of the declared tax 

amount in the account of taxpayer without any check up, as 

well as all the changes, which occur according to the proposal 

of taxpayer or on the basis of the findings of the inspection 

control of the tax authority; 

- That tax authority consistently applies offence and other 

sanctions regulated by the law and calculates interest rate 

in accordance with the law aimed at change of the taxpayer's 

behaviour and creation of tax discipline, not in any 

case for the purpose of reprisal due to non-execution of the 

law; 

- That tax authority establishes efficient tax administration, 

supported by powerful information system, connected 

to the integral information system of the Republic; 

- This system may not be open to negotiations, bargaining, 

arbitrary approvals or non-acceptance of tax credits, 

postponement of obligations to file tax returns, statements, 

payments and slective approach in relation to taking measures 

of enforcement of claims against taxpayers. 

TAX AUTHORITY COMPETENCE 

- Activities of determination, collection and control of taxes, 

which are introduced by the Republic, are performed by 

the competent Republic administration authority - Tax Administration 

of the Republic of Montenegro; 

- Activities of determination, collection and control of taxes, 

which are introduced by the Office of Local Governance, 

are performed by the competent authority of the local 

governance; 

AUTHORIZATION 

OF THE TAX AUTHORITY 

• In realization of its competences regulated by the law 

the tax authority is authorized to: 

- Perform inspection activities, take collection measures 

and other actions and activities it is in charge of according 

to the laws; 

- Make decisions on the rights of taxpayers; 

- Register taxpayers and keeps tax register; 

- Perform determination of taxes in the way and according 

to the procedure regulated by the law; 

- Request from the taxpayers and other legal persons to 

submit the documentation and offer other necessary information 

for determination of tax obligation; 

- Invite persons to participate in the tax procedure; 

- Come in and search the business premises, in which are 

kept or may be kept the business documents and records or 

other objects necessary for tax regulations application; 

- Exclude the business documents and records and other 

objects necessary for tax regulations application in accordance 

with the law; 

- Pronounce penalties for tax offences regulated by tax 

laws; 

- Use services of experts and masters, physical and legal 

persons in the procedure of determination of tax obligations, 

when professional knowledge is necessary; 

- Institute and conduct first instance administrative and 

offence proceeding; 

- Plan and implement training of employees; 

- Keep tax records; 

- Inform the taxpayers on inspection control development 

and on their rights and obligations in that procedure; 

- Offer professional assistance to the taxpayers in relation 

to application of tax regulations; 

- Provide the taxpayers with a tax return form free of 

charge; 

- Keep tax secret; 

- Refer to taxpayers and other persons with respect and 

consideration; 

- File criminal charges, economic offence charges i.e. request 

for instituting offence proceeding; 

- Send the information, including tax secrets, which were 

revealed during criminal investigation or which were come 

across during such due dilligence, to the authorities in charge 

of law implementation, when there is a founded suspicion 

that an offence or criminal act were committed; 

- Apply international agreements and contracts on avoidance 

of double taxation and other advantages related to 

19



tax payment; 

- Prepare statements about situation in the field of taxes; 

- Give initiative for adopting regulations and other acts 

for arrangement of tax system and tax policy of the Ministry 

of Finance; 

- Cooperate with other authorities and organizations in 

the country and abroad about issues related to criminal tax 

acts and in accordance with the international contracts or 

agreements; 

- Take measures that are necessary for tax officers' security; 

- Take measures for preventing corruption of officers in 

performing their official duties; 

- Organize functioning of Single Information System in 

the field of taxes; 

- Provide for execution of statements and conclusions of 

the Government in the field of taxes. 

authority in due time and in the manner determined by tax 

regulations; 

- Report to the tax authority in charge any change of the 

main place of doing business, i.e. residence and other data 

from the register of taxpayer; 

- Keep business books and records in the regulated manner 

and maintain them in accordance with the law; 

- Settle tax obligations in the manner and within terms 

determined by the law and other regulation adopted pursuant 

to the law; 

- Submit documents and other data, which are necessary 

for determination of tax obligation at the request of tax authority; 

- Enable undisturbed work of employees of the tax authority 

in performing their legal authorizations; 

- Execute other obligations determined by the tax regulations. 

RIGHTS OF THE TAXPAYER 

REGISTRATION OF TAXPAYERS 

• Taxpayer is entitled to: 

- Be informed about all issues, which enable him/her to 

file and pay the tax obligations accurately and in due time; 

- Request from the tax authority to keep secret the collected 

data about tax obligation determination and use 

them i.e. reveal it only to the institutions and bodies in the 

manner and according to the procedure regulated by this 

law; 

- Request reexamination and new determination of 

his/her tax obligation, in the way which is regulated by this 

law; 

- Get free of charge from his/her tax authority information 

on tax regulations, rights and obligations, which arise 

from them; 

- Get tax return form and other tax forms; 

- Enjoy respect and consideration of the tax authority; 

- Represent his/her own interests to the tax authorities, 

alone or through his/her authorized person; 

- Use tax reliefs in accordance with the tax regulations; 

- Get insight into data on determination and collection of 

tax obligation, which are kept about him/her with the tax 

authority and request change of inaccurate and incomplete 

data; 

- Attend the inspection control; 

- Use also other rights envisaged by the law. 

OBLIGATIONS OF TAX PAYER 

• Taxpayer is obliged to: 

- File a tax return for the purpose of registration to the 

tax authority in charge; 

- Calculate accurately the tax and file tax return to the tax 

• Registration of taxpayers is performed by entry into 

the register of taxpayers, which is kept by the tax authority 

in charge: 

- Registration is performed on the basis of registration 

forms PR-1 and PR-2, which are submitted by the taxpayer; 

- Registration form PR-1 is submitted by the taxpayers, legal 

persons or organizations, which earn income in the Republic 

or outside the Republic and foreign legal persons or 

organizations, which earn their income in the Republic; 

- Registration form PR-2 is submitted by physical persons, 

who earn their income or possess property in the Republic 

or outside the Republic and foreign physical persons, who 

earn their income or possess property in the Republic; 

- Legal persons and organizations submit their registration 

forms to the tax authority, which is in charge of that person's 

main place of doing business, i.e. organization within 

five working days from the day of entry into the court or other 

register; 

- Physical persons submit their registration form to the 

tax authority according to the place of residence, i.e. living 

place of these persons within five working days from the 

day of earning the taxable income, entry into the relevant register, 

i.e. acquiring the property, which is subject to taxation; 

- Physical persons, who do not have residence, i.e living 

place, submit their registration form to the tax authority headquarters, 

within five working days from the day of earning 

taxable income, i.e. acquiring property, which is subject 

to taxation; 

- Legal persons - big taxpayers, listed according to the criteria 

for determination of big taxpayers, submit their registration 

form to the the headquarters of the tax authority; 

- Along with the registration form the taxpayers submit 

also evidence about identification (act on registration of le- 

20



gal person or entrepreneur, personal ID, passport, driving licence, 

certificate on Household, title deed, evidence about 

emplyment); 

- If legal or physical person does not submit a registration 

form within the regulated deadline, the tax authority 

will submit the form for these persons on the basis of available 

data; 

- For the purpose of identification of taxpayer, the tax 

authority makes decision about registration, by which the legal 

and physical persons are given PIB; 

- PIB is single and only number of legal i.e. physical person 

for all kinds of taxes and it is kept in case of change of 

registered office, residence i.e. living place of the taxpayer; 

• PIB is entred into: 

- Act, which is submitted to the tax authority, state authorities 

and authorities of local administration by the taxpayer; 

- Act, which is submitted to the taxpayer by the tax authority; 

- Order according to which the taxpayer pays the tax 

obligation. 

DETERMINATION OF TAX 

OBLIGATION BY MEANS OF 

TAX RETURN (SELF-TAXATION) 

- Tax procedure is started by filing a tax return in the way 

and within the terms regulated by the law, which regulates 

certain types of taxes.; 

- Tax return is filed by taxpayer to the tax authority, 

which entered him/her in its register of taxpayers; 

- If the tax return is not filed by taxpayer within the envisaged 

term, the tax authority will file it within three days 

from the day it got information that the tax return is not filed; 

- The tax authority is authorized to fill up the incomplete 

and correct the wrongly completed tax return, immediatelly 

after it got information about omissions and mistakes in the 

filed tax return and to inform the taxpayer about that; 

- Taxpayer is entitled to file a changed tax return within 

10 days from the day of expiration of term for filing the tax 

return, in case of a mistake or omission in the tax return; 

- The tax return is filed by filling up the form regulated by 

the Ministry of Finance in accordance with the law, which 

regulates individual types of taxes; 

- Tax return is filed by the taxpayer himself or through 

the authorized person; 

- The tax return must consist of the PIB of the taxpayer 

and authorized person, if the tax return is filed by that authorized 

person; 

- Tax return is filed to the tax authority directly, by postl 

or electronic mail;; 

- Tax authority is obliged to receive the filed tax return regardless 

of its accuracy, and if the tax return is filed directly, 

the tax authority will on the basis of visual control, indicate 

to the taxpayer obvious mistakes or omissions, which 

he/she can correct within the term for its filing; 

- Determination of tax obligation is performed by the 

taxpayer on the basis of data from the business records and 

documentation, which he is obliged to keep according to 

the law, i.e. the newly registered taxpayer on the basis of estimate 

of the income to be earned in the tax period for 

which he/she files the tax return. 

DETERMINATION OF 

TAX OBLIGATION BY THE 

TAX AUTHORITY 

• The tax authority determines the tax obligation if: 

- Taxpayer did not file a tax return; 

- The tax return is filed incorrectly or incompletely and 

the mistake is not corrected or the new tax return is not filed 

within the legal term; 

- During the inspection control procedure, on the basis 

of new facts and circumstances, the inspection states that 

the taxpayer did not determine the tax properly; 

- It is regulated by the tax law (assessed taxes); 

- Determination of tax obligation is performed by the tax 

authority on the basis of business books, records of the taxpayer; 

- If the tax authority can not determine the tax obligation 

on the basis of business books and records of the taxpayer 

then it will determine the tax obligation on the basis of the 

tax base estimate; 

• In the course of tax obligation determination by tax base 

estimate, the tax authority proceeds from: 

- Available duly business documentation, if it is not entered 

in the books; 

- Available duly business documentation about doing business 

within a certain period, which is shorter than the taxation 

period (daily, weekly or monthly); 

- Data and facts about achieved turnover (daily, weekly 

or monthly) found by the inspection control; 

- Data obtained by making comparison with other taxpayers, 

who do the same or similar business in the same or 

similar location under approximately same conditions; 

- Other relevant data and facts the tax authority disposes 

of; 

- The tax authority determines the tax obligation by tax 

decision, against which an appeal may be filed, which does 

not put off its non-execution. 

• Determination of assessed taxes 

- Tax authority always makes decision on determination 

of assessed taxes when it is regulated by the law; 

• Assessed taxes are: 

- Tax on real estate determined by the municipal tax authority; 

- Tax on turnover, and 

- Tax on turnover of used motor vehicles, vessels, airpla- 

21



nes and aircrafts. 

• These two taxes are determined by the Tax Administration 

of the Republic of Montenegro. 

DETERMINATION 

OF TAX OBLIGATION 

BY THE PAYING AGENT 

• Determination (calculation, suspension and payment) 

of witholding tax is done by the tax paying agent, i.e. mediator, 

through tax return (report) he/she files to the tax authority 

reskom organu as follows: 

- collective tax return on the same day when payment of 

of revenue is made and the individual tax return on January 

31 of the current year for the previous year at the latest. 

TAX OBLIGATION 

PAYMENT 

- Tax obligation is paid by the taxpayer within the term 

regulated by the law, which regulates individual type of tax; 

- Tax obligation payment is made, by rule, through the 

holder of payment operations, by making payments on the 

relevant payment accounts; 

- Day of tax obligation payment is considered the day 

when the tax obligation payment is received on the relevant 

payment account; 

- Tax obligation, which is determined in the procedure of 

self-taxation, is paid simultaneously with filing the tax return; 

- Tax obligation, which is determined by the tax decision, 

is paid within 10 days from the day of submitting the decision, 

provided that it is not regulated otherwise by the tax 

law. 

SUBJECT OF ENFORCEMENT 

OF CLAIMS 

• Subject of enforcement of claims can be: 

- Funds of the taxpayer; 

- Monetary claims of the taxpayer; 

- Property (movable and immovable) of the taxpayer. 

PLEDGE, I.E. MORTGAGE 

- For the purpose of tax claims security, the taxpayer's property 

can be mortgaged or right to pledge can be determined 

in the course of procedure of enforcement of claims; 

- Determination of right to pledge, i.e. mortgage is performed 

in the manner regulated by the Law on Pledge, i.e 

Law on Mortgage. 

ENFORCEMENT OF CLAIMS 

FROM THE FUNDS 

- Enforcement of claims from the funds of taxpayer is 

performed by transfer of funds from the account of the taxpayer 

to the account of the one to whom tax obligation payment 

is made; 

- Enforcement of monetary claims of the taxpayer is performed 

in the manner and according to the procedure regulated 

by the Law on Executive Procedure; 

- Conclusion on enforcement of claims is performed by 

the Central Bank of Montenegro. 

COLLECTION OF TAXES 

FROM THE PROPERTY 

ENFORCEMENT OF CLAIMS 

RELATED TO TAXES 

- If the taxpayer does not pay the tax obligation in the 

course of filing the tax return i.e. when the tax decision became 

executive, the tax authority undertakes the procedure 

of enforcement of claims; 

- The enforcement of claims procedure is initiated by the 

conclusion on enforcement of claims related to tax obligations; 

- An appeal can be filed against the decision on enforcement 

of claims related to tax obligation and the appeal does 

not put off the execution of conclusion. 

- Enforcement of claims related to tax obligations 

from the property of the taxpayer consists of attachment 

and sale of property (movable and immovable) and usage 

of funds obtained through the sale or other procedure to collect 

the tax obligation. 

PROPERTY ATTACHMENT 

- Attachment consists of inventory and estimate of property; 

- Attachment is [erformed by an officer of the tax authority 

in the presence of two witnesses; 

- Attachment procedure lasts until the tax obligatin is settled 

or until the enforvcement of claims is discontinued; 

22



- The authorized officer makes minutes about the implemented 

attachment procedure, in which he states apart 

from the title of the authority, names and surnames of the 

authorized officer and witnesses, name and surname, title, 

residence i.e base and PIB of the taxpayer, inserts also the 

place and time of attachment, debt amount, interest rate and 

costs of the attachment, name, sign and description of the attached 

object, value of the attached object according to the 

estimate, surname, name, address and residence of the person 

to which the attached object is left to keep it; 

- The taxpayer and other persons from which the property 

was attached are each given a copy of the attachment minutes. 

ATTACHED PROPERTY SALE 

- Attached property sale is done by the tax authority that 

carried out the attachment, through an announcement of 

the property sale, which is announced in the media and in 

the notice-board of the tax authority within five days from 

the day of attachment; 

- Officers of the tax authority, spouse, ancestors and descendants 

of the officers, then ancestors and descendants of 

his/her spouse can not take part in the announcement for 

public bidding neither directly nor indirectly; 

- In case that the attached property is nondurable, when 

the value of the attached property is less than 10 thousand 

Euro and when the tax authority estimates that there are extremely 

important circumstances, which justify unpostponable 

sale, the sale can be executed by direct deal; 

- The funds earned through the attached property sale 

are used to settle the tax obligations in the following order: 

procedure costs, interest rate, tax. 

INSPECTION CONTROL 

- Inspection control includes the procedure of checking 

the facts and data that are important for the taxpayers and 

other persons' taxation and taking measures in accordance 

with the law; 

- Inspection control is performed by the tax authority 

through tax inspectors; 

• The inspection control procedure is initiated by the order 

for incpection control, which contains: 

- Subject of the inspection control, 

- Period of the inspection control, 

- Form of the inspection control (office or on-site control), 

- Time (start) of the inspection control, 

• Order for the inspection control is submitted to the 

taxpayer 15 days i.e. to big taxpayers 30 days before starting 

the control. 

MEASURES 

OF THE INSPECTION 

• In the course of inspection the tax inspector is obliged 

and authorized to order taking following measures: 

- Submit needed documentation and data; 

- Temporary dipossess the documentation, equipment 

and working devices; 

- Compulsory open or close the facilities for the purpose 

of inspection activities; 

- Prohibit disposal of the funds on the account; 

- Prohibit performing the activities, i.e. performing certain 

activities for a certain period of time; 

- Temporary dispossess illegally obtained property benefits; 

- Temporary dispossess raw materials, production materials, 

semi-manufactured products, finished products and 

goods which are not accompanied with the evidence about 

supply, when the goods are put into circulation by a person, 

who is not registered for that or does not have evidence oabut 

the origin of goods, when the circulatiion of products is 

done without a proscribed mark, when the goods are transported 

without obligatory documentation and when the 

goods are sold outside the business registered office or other 

place, which is determined by the competents state authority; 

- Files a complaint to the competent authority for a committed 

criminal act or economic offence and submits a request 

for instituting the offence proceeding; 

- Pronounces mandatory penalty; 

- Take other measures that he is authorized by means of 

the law and other tax regulations. 

LIMITATIONS 

- Limitation period for the right to tax obligation determination 

is five years from the expiry of the year in which 

the obligation was to be determined; 

- Limitation period for the right to tax obligation collection 

is three years from expiration of the year in which 

the tax was determined; 

- Limitation period for return of the excess payment 

of tax obligation is three years from expiration of the year in 

which the excess payment was made; 

- Limitation period for the right to determination, collection 

and return of tax is always 10 years from the expiry 

of the year in which the tax was to be determined, collected 

i.e. in which the excess payment was made. 

Prepared by: PERO MRDAK, 

Chief of the Department for the Second Instance 

Administrative and Customs Procedure 

23

„1000 housing credits” 


PROJECT OF THE 

GOVERNMENT OF MONTENEGRO 

„1000 HOUSING CREDITS” 

In order to help certain number of citizens, and employees 

in the public administration bodies to solve housing 

issues, Ministry of Finance and Commission for Housing 

Issues of the Government of Montenegro created the project 

"1000 housing credits". The project was worked out in 

order to provide opportunity to persons with inadequately 

solved housing issues to purchase new housing objects, and 

the reconstruction of the existing ones, through credit allocation, 

with subsidized interest rates. 

For the purpose of stated project, Government of Montenegro 

has made conclusions at the session on 16th March 

2006 and entrusted with them the Ministry of Finance and 

the Commission for Housing Issues to prepare and to deliver 

to the Government directions for method and criteria of 

allocation of funds earmarked for project realisation, and to 

make adequate contracts with commercial banks. 

In accordance to that, Commission for Housing Issues 

of the Republic of Montenegro has formed Work 

group for implementation of procedure of credit indebtedness 

in the Project "1000 housing credits". Work group 

has prepared the procedure and determined criteria for 

credit allocation on public administration bodies, and 

the content of the Public invitation for Project "1000 housing 

credits". 

Based on the conclusions of the Government of the Republic 

of Montenegro, Ministry of Finance and the Commission 

have included into the project commercial banks in 

Montenegro. In accordance to that, contracts have been concluded 

with Crnogorska komercijalna banka, Montenegro- 

NLB Bank, Podgoricka- Societe Generale Bank, Hypo-Alpe- 

Adria Bank and Niksicka Bank. Those contracts define 

rights and liabilities of the Ministry of Finance, of the Commission, 

banks and ultimate credit beneficiaries. 

In order to introduce the content of the project to citizens 

and employees in the public administration bodies, Ministry 

of Finance and Commission have announced Public 

24

„1000 housing credits” 


claims, provided for under the Public invitation, banks and 

state authorities were obliged to process the received claims 

in the period of 20 days, and deliver lists of approved claims 

to the Commission. By consideration of mentioned lists it is 

determined that the total number of claims is 184, which have 

met conditions of banks, which was less than the determined 

quota of 200 credit claims projected for citizens. Therefore, 

Work group has accepted lists from all banks, with all 

claims and amounts, as they were submitted to the Commission. 

In accordance to that, the Work group sent the draft 

conclusion to the Commission to verify mentioned lists of 

banks and to inform banks about that. 

Senior employee 

Dragan Darmanović 

invitation for participation in allocation of "1000 housing 

credits". 

Public invitation was announced on 10th May 2006, and 

it lasted for 15 days. During that period, as it was defined by 

the Public invitation, citizens submitted their claims to 

banks, while employees in the public administration bodies 

submitted their claims in bodies where they work. 

Public invitation defines that project "1000 housing credits" 

should comprise following credit lines: 

• 200 credits for reconstruction to the amounts up to 

5.000 eur, and repayment period up to 5 years; 

• 300 credits for enlargement and/or supplemental purchase 

of the housing to the amounts up to 15.000 eur and repayment 

periods up to 10 years; and 

• 500 credits for solving of housing issue to the amount 

up to 30.000 eur and repayment periods up to 20 years. 

Of anticipated 1000 housing credits, 800 credits were 

earmarked public servants, out of which: 600 housing credits 

for employees in the government administration bodies, 

200 housing credits for employees in the Health Insurance 

Fund of the Republic and other public medical institutions. 

For citizens of the Republic of Montenegro 200 housing credits 

were projected. 

Public invitation determined that claimants should submit 

data on whether they possess housing or is it inadequate, 

on the years of service, and on number of family members. 

The project estimated that the total interest rate of the 

bank is 6,4% yearly. For ultimate credit beneficiaries interest 

rate was 4% yearly, while the Government of the Republic of 

Montenegro accepted to subsidize rate with 2,4% yearly. 

Subsidized interest rate amount Ministry of Finance would 

pay by more instalments, during the period not longer than 

3 years. 

After the expiration of the deadline for submission of 

Commission verified and approved the lists and informed 

the banks regarding that. After the approval, banks started 

the procedure of concluding contracts with citizens, for 

the purpose of realisation of the approved housing credits. 

Furthermore, the Commission also received lists of employees 

in the governmental bodies, which have submitted 

their claims to heads of the governmental bodies where they 

work in. Bodies made lists where the employees were ranked 

according to the terms specified in the Public invitation 

(years of service, number of household members and solved 

housing issue). After the consideration of the received 

claims, Work group stated that the large number of claims 

was received from public administration bodies (over two 

thousand), and has made credit reallocation based on the 

previously fixed quota and methodology. Based on that, 

Work group has made credit allocation according to bodies, 

and determined how many credits belong to which body. 

After the claim analysis, 595 credits were granted, out of 

which 301 to the amount up to 30.000eur, 183 up to 15.000 

eur and 111 credits up to 5.000 eur. To the Health Insurance 

Fund of the Republic and other medical institutions, for 

which 200 credits were provided for under the Public invitation, 

185 credits were allocated, 93 credits up to 30.000 eur, 

56 up to 15.000 eur and 36 up to 5.000 eur, while the remaining 

15 credits will be subsequently allocated within the 

medical institutions. 

Commission adopted the suggestions of the Work group 

at the session held on 14.06.2006, and informed governmental 

bodies and banks about its decision, so that signing of 

contract between employees in the governmental bodies 

and banks could begin. 

Public servants, who according to the rank-list made by 

the public administration bodies have passed the selection, 

will conclude with banks contracts on allocation of housing 

credits, if they fulfil terms of the banks. 

Senior advisor 

DRAGAN DARMANOVIĆ 

25

European Bank for Reconstruction and Development 


EUROPEAN BANK FOR 

RECONSTRUCTION 

AND DEVELOPMENT 

INTRODUCTION 


(EBRD) was established in 1991 with a view to speed up 

and strengthen market reform process and transition in 

Central and East European countries and create conditions 

for efficient functioning of open market economies 

in these countries. It is owned by 60 countries and two intergovernmental 

institutions. EBRD, with its capital, is the 

largest single investor in the region. 

The Bank uses its relationship with the governments 

in the region to promote creating of better and more efficient 

business environment. The mandate of the EBRD 

stipulates that it must only work with the countries that 

are committed to democratic principles. Respect for the 

environment is an integral part of the strong corporate 

governance attached to all EBRD investments. 

EBRD, inter alia, provides project financing for banks, 

industries and business, both new ventures and investments 

in existing companies. The Bank also supports privatization 

process, restructuring of state-owned companies 

and improvement of municipal services. 

MEMBERSHIP OF THE STATE UNION 

SERBIA AND MONTENEGRO 

TO THE EBRD 

Former Socialist Federal Republic of Yugoslavia was 

one of founders of the European Bank for Reconstruction 

and Development since 1991. Accordingly, the SFRY 

was entitled to use the Bank funds. 

After break-up of the SFRY, State Union Serbia and 

Montenegro (which was Federal Republic of Yugoslavia 

until 2003), regulated its membership to the EBRD in January 

2001, on the basis of Resolution No. 81 adopted by 

the EBRD Board of Governors on 13 December 2000 on 

SaM membership to the EBRD. 

It is noteworthy that State Union Serbia and Montenegro 

(SaM) hosted EBRD Annual Meeting. Namely, 14th 

Annual Meeting was held in Belgrade from 21-23 May 

2005. Serbia and Montenegro, as a host country, successfully 

presented and promoted its economy and potential 

opportunities and projects for making foreign investments 

to the representatives of governments, central 

banks, international financial institutions, banks and major 

companies that were present at the Annual Meeting. 

26



International Co-operation and EU Integrations Department, 

Co-ordinator 

Jadranka Radunović 

INFRASTRUCTURE PROJECTS IN 

THE REPUBLIC OF MONTENEGRO 

Following renewal of SaM membership to the EBRD, 

Montenegro has intensively co-operated with the EBRD 

representatives. Over the last couple of years, EBRD invested 

significant funds in Montenegro by providing 

loans for projects in the area of transportation, air and 

road infrastructure as well as for the privatization of companies. 

• Pre- Privatization Loan for Aluminum Plant Podgorica 

(KAP) aimed to facilitate the preparation and implementation 

of the KAP privatization, with the assistance of 

an independent privatization adviser and independent 

adviser for the Project Implementation Unit. 

• Podgorica and Tivat Airports Modernization Project 

for ensuring a higher level of safety and better services in 

compliance with the International Civil Aviation Organization 

(ICAO) standards. The funds were earmarked for 

construction of a new passenger terminal; modernization 

and runway lightings of the Podgorica Airport; extension 

of existing passenger terminal at the Tivat Airport; 

procurement of fire-fighting equipment; and consulting 

services. 

• Future Air Traffic Management Modernization and 

Upgrading System. The credit funds were earmarked for 

modernization of air traffic control with a view to improving 

air traffic safety and capacity increasing. 

• Montenegro Regional Road Rehabilitation Project. 

The Project is aimed at rehabilitation of the road and stabilization 

of slopes on Mioska-Kolasin road, and construction 

of climbing lane at Obzovica, on the section of 

Cetinje-Budva road. 

Namely, EBRD invested in Montenegro credit funds 

amounting 28,18 mil. eur, out of which following projects 

were funded: 

The Bank is interested in further investing in Montenegro, 

primarily in terms of providing loans for projects 

related to improvement of transport and energy sector 

and regional infrastructure in the country; projects related 

to environmental protection along the Montenegrin 

Coast that are relevant for development of tourism which 

represents a potential for investment growth and impro- 

27



EBRD 

vement. In order to improve tourism, the Bank is interested 

in funding the projects, which are mainly related to 

water supply; addressing the waste water disposal issue; 

coastline pollution etc. 

It is important to note that the EBRD has been funding 

the following programs: 

TurnAround Management (TAM) Program, aimed at 

increasing of industry-specific know-how and confidence 

and management level in enterprises, and 

Business Advisory Services (BAS) Program, providing 

business consulting services, where local consultants 

provide assistance to SMEs in their business operations, 

TAM and BAS programs have been financed with a view 

to support economic reforms in countries in transition, 

enabling companies to successfully conduct their 

business operations under market economy conditions. 

The programs imply business advisory services which 

are provided by most renowned experts in the field of 

business, organization of work, marketing, finance etc. 

The programs have been mainly financed from EU 

funds- through the European Agency for Reconstruction 

(EAR), Europe Aid, PHARE, and TASIC and from bilateral 

donations (Austria, Belgium, Canada, Denmark, France, 

Greece, Italy, USA etc.). 

In order to apply for participation in the TAM and 

BAS programs, a company needs to meet certain criteria, 

i.e. it should be a private local company, which may not: 

offer any financial and banking services; produce any military 

equipment and tobacco; and organize any games 

of chance. The company should: have developmental potentials; 

require consulting services and have capacities 

in place for implementation of assistance which has been 

hereunder provided. 

State Union Serbia and Montenegro has been included 

in the said program since 2000. For the purpose of 

the BAS Program realization, a regional office was established 

and became operational in Podgorica in 2003. 

106 projects have been launched through the regional office, 

which have been mainly financed from the EAR 

funds. 

Following regaining of the state sovereignty, Montenegro 

has undertaken steps to speed up a renewal of its 

membership to the EBRD and continue successful cooperation 

in implementation of credit arrangements that 

have already been or are to be launched. During the Conference 

of a prominent British Agency "Euromoney" in 

London, from 19 - 21 July 2005, the EBRD representatives 

and Montenegrin delegation exchanged their views on 

current political and economic situation in Montenegro 

following renewal of independence, including current 

projects funded by the EBRD and future projects as well, 

focusing on a future status and membership of Montenegro 

in this multilateral institution. President of the Bank, 

Mr. Jean Lemierre announced opening of a permanent 

EBRD Office in Podgorica due to increasing investment 

interest and for the purpose of institutional co-operation 

strengthening. 

International Co-operation 

and EU Integrations Department, 

Co-ordinator, 

JADRANKA RADUNOVIC 

28

Transfer of army property to the Republic of Montenegro 


TRANSFER OF ARMY PROPERTY 

TO THE REPUBLIC 

OF MONTENEGRO 

Rule over the immovable property, which was in the former 

country given for utilization to the Army of Serbia 

and Montenegro, is one of the issues that during the 

past period were objects of great interest of the home-public, 

but also of the significant number of foreign investors. 

Property, which in certain procedures had been estimated 

as unnecessary for the Army, and for which investors have 

shown interest, was transferred to former Fund for the Reform 

of the Defence System of the Serbia and Montenegro, 

and all funds that were realized by sale were transferred to 

the accounts of the Ministry of Finance of the Republic of 

Montenegro. Ten objects were sold this way and the realized 

income was 14.1 mil eur. 

After the 3 June, all immovable property used by the Army 

at the territory of the Republic of Montenegro, became 

the property of the State of Montenegro. The Government 

of Montenegro at the session held on 08.06.2006, made conclusions 

which refer to the transfer of army property to the 

Republic of Montenegro. The conclusions defined procedures, 

deadlines and obligations of responsive military and other 

services in charge of their implementation and entrusted 

Ministry of Finance for coordination of activities on 

their realisation. 

Considering the fact that it is a large number of locations, 

out of which a significant number is very attractive, a special 

commission which is to perform evaluation of real necessities 

of the defence system in Montenegro, will be formed in 

the forthcoming period. Those locations which are found to 

be unnecessary for functioning of the new defence system 

shall be assigned to other governmental bodies for usage or 

will be subject to possible sale, rent, forming of special business 

companies, pooling of property etc. toward which the 

Government of Montenegro shall take a stand regarding 

each individual case. 

Advisor to 

the Minister 

Predrag 

Stamatović 

It is to be expected that, because of the attractiveness of 

locations, especially those located at the coast, a large number 

of international companies shall become part of this 

process. Aggravating circumstance for investors is that these 

locations are not urbanized, so a secret partnership should 

be made between the State as seller, local self-governments 

and future investors. Beside the significant income that will 

be realized this way, another goal that we find to be very important 

goal will be accomplished and that is further valorisation 

of space in accordance to the strategic development 

commitments. 

Advisor to the Minister 

PREDRAG STAMATOVIĆ 

29

Support to reform processes of the defence systems 


MINISTRY OF FINANCE 

- SUPPORT TO REFORM PROCESSES 

OF THE DEFENCE SYSTEM 

Advisor for the Defence Budget in the 

Ministry of Finance 

of the Republic of Montenegro 

Mijajlo Savovic, M.A. 

By gaining independence and sovereignty, and by forming 

Ministry of Defence of the Republic of Montenegro, 

one of the few common functions of the State 

union, related to the Ministry of Defence and Army has ceased 

to exist. 

Montenegro now has chance to fully complete its defence 

system and the activities on that plane are in full swing. 

Since the transition to the territorial principle of financing 

(May 2003), Montenegro has been creating conditions 

and has taken specific actions for successful Army reform 

and independent performance of the defence functions, 

which can be seen in the following: 

- Determination of the government officials of the Republic 

of Montenegro regarding the necessity and course of 

Army reform was clearly noticeable, and the support to reform 

process was also given by the Army itself; 

- Since January 2004 until June 2006, number of persons 

that receive salary from the Army, with planned and transparent 

process has been reduced for 3.236, or for 47%, so that 

in June it amounted 3.624 persons; 

- Social program for the surplus of manpower in army 

was fully financed and for that purpose circa 5 million EUR 

was spent; 

- Total stability in the army financing was achieved; 

- Expenditures for defence in the estimated GDP were reduced, 

from 2,53% in 2005, to 2,40% for 2006; 

- Accounting center was formed as important body of 

30

Support to reform processes of the defence systems 


the Ministry of Defence of the Republic of Montenegro for 

logistic support for payroll accounts, keeping of the financial 

books, control of business operations and relations with 

the Treasury; 

- The payment of military pensions for beneficiaries on 

the territory of the Republic of Montenegro was taken over, 

after Social Insurance Fund for Social Insurance of Military 

Insurees Beograd had unilaterally suspended further payments 

in the second half of 2005; 

- Two non-profitable army-income institutions were liquidated 

(''Ribnica'' and ''Lovcen'') with about 200 employees; 

- Privatisation procedure of the Military Medicine Centers 

Meljine and TRZ ''Sava Kovacevic'' Tivat had started; 

- Through active and cooperative work in the Fund for 

Defence System Reform of the State Union, assets were provided 

from the sale of the part of the real estate, which Commission 

of the Council of Ministers for Property Division 

proclaimed to be the property unnecessary for further functioning 

of Army, and after that Government of the Republic 

of Montenegro consigned to the Fund for Reform of the Defence 

System for sale. Funds acquired from sale were, in accordance 

to Conclusions of the Government of Montenegro, 

spent for necessities of Army (social program, payment 

of wages arrears and material expenses, and one part fell to 

the share of the Restitution Fund); 

- After the analysis of funds with which Republic of Montenegro 

participates in the financing of the functions of the 

State Union and with the projection of optimal expenses, 

the conclusion has been reached that Montenegro can perform 

those functions independently; 

Activities on arranging and organisation of functioning 

of unique defence system of the Republic of Montenegro 

are underway or forthcoming, regarding: 

- Enactment of the Law on Defence and Law on Army of 

Montenegro, and of related by-laws and other doctrinaire 

documents; 

- Total professionalisation of Army which, among other 

things, implies abolition of recruitment; 

- Defining of amount and structure of Army of Montenegro, 

and further activities on reform which will last for a longer 

period of time; 

- Realisation of the assignment of professional army 

members, which expressed wish to continue their service 

on the territory of the Republic Serbia (552), and those 

which want to continue their service from the territory of 

the Republic Serbia to the territory of the Republic of Montenegro 

(13); 

- Planning of the budgetary expenditures in accordance 

to the international standards and the projection of expenditures 

of independent forming of military forces, which 

includes continuation of the trend of reduction of costs for 

defence at circa 2% of GDP, change of structure of costs, defining 

of social program for surplus of manpower, and earmarking 

of resources for modernisation and equipping of 

Army; 

- Defining of property needed for functioning of the Army 

and procedure with property which is no longer necessary 

for the Army (sale of the part of that property for purpose 

of Army needs of high priority - solving on housing 

matters etc.); 

- Reforms of health care and pension and pension and 

disability insurance of military insurees; 

- Inclusion of military pensions into Pension and Disability 

Security Fund of the Republic of Montenegro - by the 

Fund, taking over of the logistics for accounts and payment; 

- Admission in Partnership for Peace, NATO, and other 

international organisations and institutions, for the purpose 

of development and maintenance of collective and national 

safety. 

Furthermore, two important questions arise due to their 

actuality, which are to be solved in the forthcoming period, 

and those are: 

1. Ministry of Defence of the State Union left to Montenegro 

one very serious problem regarding large number of litigations 

of professional and pensioned army members because 

of the mismatched wages for some years past; 

2. By taking over of the payment of military pensions 

Montenegro gained right and possibility to claim from the 

Fund for Social Security of Military Insurees Belgrade (Republic 

Serbia), revalorised or in other method determined 

amount of investment in the Fund during the employment 

of professional soldiers at the territory of the Republic of 

Montenegro. 

Ministry of Finance of the Republic of Montenegro is 

highly involved in the reform processes of the Army and defence 

system in total, and it gives support to those processes 

full. 

MIJAJLO SAVOVIĆ, M.A., 

Advisor for the Defence Budget 

in the Ministry of Finance 

of the Republic of Montenegro 

31

Most important activities of the minister of finance 


REVIEW OF THE MOST IMPORTANT 

ACTIVITIES OF THE MINISTER OF 

FINANCE APRIL - JUNE 2006 

28.06.2006. -Meeting of the Ministers of Finance and 

Central Bank Governors: Luksic - Dinkic - Jelasic - Krgovic 

Minister of 

Finance in the 

Government of 

Montenegro Igor 

Luksic: "To Montenegro 

belongs 

5.88 percent of 

44.6 million $, 

which will be reduced 

for certain liabilities to Serbia. Serbia will pay 30 million 

EUR balance to Montenegro, out of which 1.5 million 

EUR is for membership in international financial institutions. 

Membership deposits depend on economic strength 

of country, therefore it is possible that they will be lower for 

Montenegro". 

Minister of Finance in the Government of Serbia Mladan 

Dinkic: "Existing quota in IMF amounts 467.7 million of Special 

Drawing Rights or 698 million $ and Serbia succeeds it. 

Montenegro will get 5.88 percent or 41 million $". 

At the meeting they discussed about old foreign currency 

savings, and it has been agreed that future talks should be 

held on the level of former SFRY. Military pensions were also 

discussed, for which negotiators had no mandates to make 

any specific agreements. 

Dinkic and Jelasic congratulated yesterday to citizens of 

Montenegro on raising of flag at East River. 

20. 06.2006. - Minister of Finance Igor Luksic held talks 

with the President of the European Bank for Reconstruction 

and Development Jean Lemier 

During the meeting, views 

were exchanged on the current 

political and economic situation 

in Montenegro after the gaining 

of independence, and both sides 

have expressed satisfaction 

with the democratic atmosphere 

and overall economy plan. 

Also, they discussed current projects financed by ERBD, 

and possible future programs, with emphasis on future status 

and membership of Montenegro in that multilateral institution. 

The mutual satisfaction was expressed with progress 

in economic and overall reforms, and with past cooperation, 

and the president of EBRD Jean Lemier announced the opening 

of permanent office of that institution in Podgorica- 

Montenegro, due to growing investment interest and strengthening 

of institutional cooperation. 

13.06. 2006.god. - Minister of Finance Igor Luksic held 

talks with Head of Delegation of the IMF, Peter Doyle: 

"I had a chance today, together with the president of the 

Council of the Central Bank, Mr Ljubisa Krgovic first of all to 

talk to Mr Peter Doyle, new chief of IMF Mission for Serbia 

and Montenegro within the mission that recently started 

and actually has officially started with the meeting we had 

today. We are talking about the visit of IMF with the purpose 

of analysis of macroeconomic situation in Montenegro 

and Serbia and at the same time with the purpose of analysis 

of forthcoming medium-term challenges in that period"… 

02. 06.2006. - Sveti Stefan: Opening statement of Igor 

Luksic, Minister of finance at the Regional Conference of Ministers 

of Finance and Governors of Central Banks of South- 

East Europe 

"It is my pleasure to welcome you on behalf of the Government 

of Montenegro. We are grateful for the occasion 

to be hosts of the conference as eminent as this. These gatherings 

always represent a good opportunity for improvement 

of cooperation and establishment of strong relations 

between our countries… 

At the very beginning, I would like to emphasise that previously 

realised economic independence and sustainability 

of Montenegro had its logical sequence - the gaining of formal 

independence. The issue of state-legal status of Montenegro 

has been solved and we expect this to have a great influence 

at the further development of our economy. Positioning 

itself as one of European centers, instead as a part of 

32

Most important activities of the minister of finance 


non-functional 

union allows our 

country to participate 

and stimulate 

economic integration 

processes on 

equal terms. This 

way, it will promote 

easier numerous 

resources that 

will have for goal economic development." 

26.04.2006: - Minister of finance Igor Luksic, PhD, 

anent signing of Cooperation Agreement between Ministry 

of Finance of Montenegro and Ministry of Finance of Iceland: 

"I had a pleasure today to sign the Agreement on cooperation 

between two Ministries with my colleague, Minister 

of finance of Iceland Arni Mathiesen. Small countries are 

oriented to each 

other, especially if 

they have significant 

similarities. 

For us in Montenegro, 

especially after 

the renewal of 

sovereignty, experience 

of Island is 

very interesting, 

because it can represent 

a model for a faster growth and development, what 

is in today world characteristic of smaller countries..." 

24.04.2006: - Working visit to Washington continued 

with talks with American administration 

Representatives of the American administration showed 

special interest in current political moment in Montenegro 

and projection of future relations with IMF and World Bank. 

In that contest, Minister Luksic stated that political developments, 

organisation 

of referendum 

and later of 

elections, shall 

have no negative 

influence on economic 

performance 

and has 

repeated willingness 

of the Government 

of 

Montenegro to discuss with the Government of Serbia 

about all maters of mutual interest in the period after the referendum... 

24.04.2006: - Delegation of Montenegro continued 

working visit to Washington with talks with representatives 

of the IMF 

Delegation of Montenegro, headed by Minister of finance, 

Igor Luksic, PhD and President of the Central Bank, Ljubisa Krgovic 

continued its working visit to Washington with talks 

with the representatives of the IMF: Ann Kruger, deputy director 

of IMF, Michael Deppler, director of IMF for Europe, and 

new chief of Mission Peter Doyle. Topic of the talks was current 

economic situation in Montenegro and audit of just finished 

arrangement, and framework for future arrangement… 

24.04.2006:- Spring meetings of the IMF and World 

Bank' talks of Montenegrin delegation with USAID 

Delegation of the Republic of Montenegro, during Spring 

meetings of the IMF and World Bank, met the director for Balkans 

in the USAID, Mr 

Edward Dickens. Fiscal 

movements in 

Montenegro and relations 

with international 

financial institutions 

were analysed. 

The question of realisation 

of current 

USAID projects was 

emphasised, as was the question of program for the next 3 

years, especially in infrastructural and other development areas… 

Minister of Finance, Igor Luksic, PhD and the president 

of the Council of Central Bank of Montenegro, Mr Ljubisa 

Krgovic, within the contacts with the business community 

had meeting with investment group from New York, Pickwick 

Capital. They discussed about economic ambient for 

private investments in Montenegro. They emphasised the 

special interest of this investment group for areas: tourism, 

energetics, health, education and financial services. 

PR SERVICE 

Spokesperson, ANA MILJANIĆ 

Senior Employee I, MAJA BAŠIĆ 

33

Review of other news 


REVIEW OF OTHER NEWS 

- ACTIVITIES OF THE MINISTRY 

OF FINANCE 

Draft Law Amending and Supplementing Law on Personal 

Income Tax for Private Persons since Friday 1st - 15th 

July 2006 on public debate. 

All interested subjects can send their proposals, suggestions 

and opinions at e-mail address of the Ministry of Finance 

mf@mn.yu or on fax: 224 450. 

This will initiate the consideration of the amendments to 

the Law on Personal Income Tax for Private Persons, which 

is planned to introduce the proportional tax rate and its significant 

reduction, and which should in 2010 be 9% (as is the 

rate for profit tax for legal persons) 

Payment of the third instalment to the owners of the 

old foreign currency savings - 3rd July 2006. 

To the owners of old foreign currency savings, which 

mature on 1st July 2006, payment of the third instalment to 

the amount defined by their plan of amortization will start 

on Monday 3rd July in commercial banks and regional centres 

of Central Bank of Montenegro. For the payment of 

this, the third bond series from the Budget of the Republic is 

planned 8,7 million EUR. Depositors that have after 1st July 

reported to their bank and thus registered themselves at 

CDA as bond owners based on converted savings can draw 

the third instalment in regional centres of the Central Bank 

of Montenegro and Pljevaljska Bank AD Pljevlja, depending 

on their residence, based on their identification document 

(identification card and passport). 

The owners of old foreign currency savings, which haven't 

used their right on payment of the first and second 

bond series to the amount of 380 and 530 EUR can draw all 

three instalments. They are to go to the bank in which they 

have their savings deposit book, or to the related counter of 

the Central Bank, where they will receive certificate on conversion 

of savings into bonds. 

Ministry of Finance of Montenegro has paid funds for 

military pensions- for May 2006 

Ministry of Finance has paid funds for military pensions 

today (for May 2006). The payment will start on Saturday 

24th June 2006. 

Final announcement of the International Monetary 

Fund Mission after the visit of that delegation to Montenegro 

Independence for Montenegro represents the new beginning. 

In that context, our goal is to offer suggestions on 

how to use the best this unique chance in the macroeconomic 

sphere. 

Many things are progressing well. Inflation is low, public 

debt has tendency to fall, collection of the VAT contributes 

to the good realisation of income, direct foreign investments 

are growing with new ones expected to come, banks are privatized, 

credit activity is expanding, access to EU markets is 

realised with allowances, and chances for achievement of 

the Stabilisation and Association Agreement and for membership 

in WTO and Partnership for Peace are good. 

Your ambitions are appropriate. You are trying to achieve 

permanent increase of economic growth, employment 

and real income, both as independent goals and as basis for 

entering EU one day. 

These goals are achievable. For their achievement will 

be necessary, first of all, operating, in order to provide maintenance 

of regular terms for economic activity in the context 

of independence, and second, bigger emphasis on middle-term 

than on short-term goals in formulation of macroeconomic 

policies, especially in terms of flexibility, sustainability 

and offer. 

Independence 

- Your sovereignty should be fully reflected in legal solutions, 

which regulate your international economic relations. 

It is necessary to be understood that agreements previously 

made between Serbia and Montenegro and international 

community on questions like free trade in the region, veterinary 

standards, double taxation, etc. now you yourselves 

should accomplish in order to provide continuing regular 

terms for economic activity. Furthermore, legal regulations 

concerning economic relations with Serbia should be clarified. 

Main issues are matter of stay of citizens from one sta- 

34

Review of other news 


te in another and exercise of rights from the sphere of social 

security and working permits. Agreement on free trade zone 

would ensure undisturbed continuation of former trade 

arrangements. Moreover, the total account of former net fiscal 

transfers to State Union is recommended. It should reduce 

budgetary transfers to the Union for costs that will now 

pay as functions of the Union that are delegated to the Budget 

of Montenegro. This will help realisation of the budget 

for 2006 and making of the budget for 2007. 

Draft Law on Tax Advisors - public dispute 22.06.2006 

This Law regulates activity of the tax counselling as independent 

and autonomous occupation, authorisation and 

obligations of tax and customs advisors (hereinafter: tax advisors), 

and other matters significant for performance of 

those activities... You can send your proposals, suggestions 

and opinions at the e-mail address of the Ministry of Finance 

mf@mn.yu or at fax: 224-450 in the next 15 days. 

Visit of the delegation of International Monetary Fund 

to Montenegro 12 June 2006 

Aim of the mission and talks with Montenegrin officials 

and institutions is analysis of the implementation of agreed 

policy, and of further reforms of the financial sector in Montenegro. 

Also, creating of macro economic policy and setting 

of medium-term macroeconomic goals will be in the focus. 

After the completion of the mission on 22nd June, we 

expect that representatives of IMF publish final statements 

concerning the results of held talks. It is also important to 

remember that Montenegro has successfully concluded at 

the beginning of 2006 so called "extended arrangement" 

with IMF which lasted from 2002. The outcome of that arrangement 

and its successful conclusion led to, beside the significant 

positive image of Montenegro at the financial market, 

and to further write-off of debt of Montenegro to Paris 

Creditors Club to the amount of circa 26 million EUR. 

Commission for issuance of licences for auditors -Activities 

- 

Commission for Issuance of licences for auditors in the 

period from 1st January to 30th June 2006, held 10 sessions 

on which it issued 29 licences to the auditors and those are: 

to Milovan Popovic, Dejan Krivokapic, Krsto Spaic, Veselin 

Milacic, Zorica Vujovic, Ljerka Momcilovic, Branka Bojovic, 

Predrag Rakocevic, Ljiljana Velimirovic, Ibro Sabovic, Jelena 

Jakovac, Vesna Kotlaja, Ljiljan Milinovic, Momcilo Mihaljevic, 

Senka Popovic-Mitric, Maja Krstic, Vesna Radunovic, Mladen 

Ognjenovic, Kristina Bukilic, Dejan Savic, Sava Obradovic, 

Goran Strahinja, Lidija Matovic, Branka Vuksanovic, Drasko 

Popovic, Vladimir Carapic, Nada Guzina, Milos Macura and 

Vladimir Filipovic. 

List and data of auditors with licence can be found at the 

website of the Ministry of Finance of Montenegro www.ministarstvo-finansija.vlada.cg.yu. 

For the purpose of control of financial reports of the Ministry 

of Finance supplemented lists with data in auditors, 

Spokesperson 

Ana Miljanić 

after each newly issued licence, is forwarded to business 

courts. 

Commission also issued two approvals for choice of the 

audit company for performing of audit of accounting statements 

for 2005, to Crnogorska Komercijalna Bank and Atlasmont 

Bank. For that period 3 requests for issuance of licence 

were turned down because they did not meet the conditions 

proscribed by the Law on Accounting and Revision 

("Official gazette RoM ", no.69/05). 

Draft Law on Check- public dispute - 31st May 2006 

You can send all proposals and suggestions concerning 

Draft Law on Check at the email address of the Ministry of 

Finance mf@mn.yu or on fax 224 - 450 during next 15 days. 

Representatives of the work group for drafting of sub 

legal regulations in the sphere of public procurement held 

working meeting with experts of OECD/SIGMA 

During the talks, Secretary of the Public Procurement 

Commission Katarina Radovic, reminded that the new Law 

on Public Procurement will constitute new institutional frame 

and new procedures, harmonized with EU legislation. 

Spokesperson of the Ministry of Finance Ana Miljanic, emphasised 

the necessity of systematic instalment of mechanisms 

for as transparent procedures of public procurement 

as possible, for the purpose of establishment of more efficient 

system. Realisation of determined activities will provide 

conditions for full implementation of the Law, from the moment 

of its entering into force. For education of all subjects, 

involved in the public procurement system, and presentation 

of new procedures to them, sub legal regulations will 

be drafted prior to the deadline set under the Law. 

Spokesperson 

ANA MILJANIĆ 

35

Payment of third instalment of old foreign currency 


PAYMENT OF THIRD INSTALMENT 

OF OLD FOREIGN CURRENCY 

Payment of the third instalment to the amount determined 

by their plan of amortization, which matures 

on 1st July 2006, will start from Monday 3rd July to 

the owners of old foreign currency savings in commercial 

banks and regional centres of the Central Bank of 

Montenegro. For the payment of the third bond series, 8,7 

million EUR is determined by the Budget of the Republic. 

Depositors that after 1st July 2004 reported to their 

banks and thus have registered themselves in the CDA as 

owners of bonds on the basis of converted savings, can 

draw the third instalment in the regional centres of the 

Central Bank of Montenegro and Pljevaljska Bank AD 

Pljevlja, depending on their residence, based on the document 

of identification (identity card and passport). 

Owners of old foreign currency savings, which haven't 

used their right for the payment of the first and second 

bond series to the amount of 380 and 530 EUR, from 3rd 

July this year can draw all three annuities. They are to go to 

the bank where they have their savings deposit book, or to 

the related counter of the Central Bank, where they will 

receive certificate on conversion of savings into bonds. 

Former depositors of Montenegrobanka AD Podgorica 

and Jugobanka AD Podgorica in bankruptcy should report 

to the related counter of Central Bank of Montenegro. 

Legal persons that have acquired old currency savings 

bonds by purchase of bonds at the exchange market can 

draw the third instalment at the counter of Nikšićka Bank 

AD Nikšić. 

For new owners of bonds, which acquired bonds on the 

basis of the deed of donation, notice of probate of will or 

purchase at the exchange market, arrangement of counters 

at which they can draw the third instalment depending on 

the residence is also determined. 

If the owner of old currency savings bonds is not able to 

come to the bank, authorized person based on the notarized 

court authorisation can draw determined amount of 

the third series, instead of the owner. 

Owners of old currency savings bonds that have lost 

their certificate will be able to get the transcript of ownership 

of old foreign currency savings bonds in the Central 

Depositary Agency (CDA). 

Successors of old foreign currency savings bonds, which 

acquired them based on the valid notice of probate of will 

for additional information on exercise of their right can 

obtain further information in CDA at phone number 

081/230-084, contact person Rajka Dragićević. 

Detailed information and arrangement of payment 

places will be announced by the Ministry of Finance on 

Friday, 30th June 2006 in all journals. This information will 

be available on all payment places in regional centres of the 

Central Bank of Montenegro and in commercial banks. 

In June, while the bond payment was temporarily 

stopped as was the exchange market trade for better preparation 

for free payment of second instalment, data from all 

banks on payment of the first instalment and data from the 

capital market on bonds that were subjects of the exchange 

market trade were unified, which provided security of data 

on owners of bonds as securities. 

PR SERVICE OF THE MINISTRY 

36

Report on account of public debt of Montenegro 


REPORT ON ACCOUNT OF PUBLIC 

DEBT OF MONTENEGRO 

BY 30TH JUNE 2006. 

1. AMOUNT AND STRUCTURE OF 

PUBLIC DEBT OF 

MONTENEGRO 

Public debt of Montenegro amounted 644,4 million EUR 

as of 30.06.2006. Domestic debt amounted 167,7 million EUR 

or 26,0% of total debt while the foreign debt amounted 476,7 

million EUR or 74,0% respectively . It is primarily due to ongoing 

negotiations and allocation of debt, ongoing negotiations 

on succession of 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 financial assets 

and liabilities with the Republic Serbia. 

In 2002, public debt amounted over EUR 1 billion. It is the 

amount which was determined prior to debt rescheduling 

with the International Bank for Reconstruction and 

Development and Paris Donors Club and prior to final agreement 

with Serbia concerning liabilities to the London 

Creditors Club. 

The largest share of public debt of Montenegro refers to 

inherited long-term liabilities of the old system (former SFRY 

and SRY). This share primarily refers to foreign debts 

assumed by the Law on Regulation of Liabilities and Claims 

arising out of foreign debt and foreign currency savings of citizens, 

which at the end of June 2006, amounted 404,9 million 

or 62,8% of the public debt, mostly loans extended by the 

International Bank for Reconstruction and Development and 

Paris Donors Club. 

Beside old foreign debts, "assumed" public debt is also 

1-2 - According to Maastricht Criteria the amount of public debt does not include debts of public enterprises, including the ones with government guarantee, 

except it is certain that those debts will be paid from the State Budget or are already being paid, as is the case with the credit of EIB for Port Bar to the amount 

of 6 million EUR. 

37



consisted of liabilities on the basis of old foreign currency 

savings, assumed by the same Law. Liabilities on the basis of 

old foreign currency savings, at the end of 2004, amounted 

123 million EUR, at the end of 2005, 117 million EUR, and at 

the end of first half-year 114,0 million EUR which is 17,7 % of 

public debt. Therefore, at the end of June 2006, assumed 

long-term liabilities of old system represent 80,5% of total 

public debt of Montenegro. Remaining 19,5% refer to new 

indebtedness which arouse in the period from 2000 to June 

2006, liabilities in the basis of credits, treasury bills, local selfgovernments 

debts and outstanding budgetary liabilities. 

2. FOREIGN PUBLIC DEBT 

Foreign public debt amounted 476,7 million EUR. The 

share of that is "old" debt 404,9 million EUR or 84,9% and the 

new amounts 71,9 million EUR or 15,08%. Share of foreign 

debt in Gross domestic product which shows the level of foreign 

indebtedness of the country had trend from 68,7% 

before the debt rescheduling to 27,1%, which is his amount at 

the end of June 2006. 

In the table 3 you can see the structure of foreign debt to 

creditors. 

Decision of the Government in November 2005, assumed 

credit of the European Investment Bank, which in June 

amounts 15 million EUR (is withdrawn in total). Debt on the 

basis of credit of 24 million EUR to the European Investment 

Bank for the construction of Sozina tunnel is excluded from 

the public debt, without public enterprises and has become 

the debt of the public enterprise Monteput. 

2. Debt to Paris Donors Club on 31. December 2005, 

amounted 151,6 million EUR, and is shown in the reduced 

debt amount for 51%, which represents the write-off in the 

first phase. After the expiration of the three-year arrangement 

with the IMF and positive opinion on macroeconomic trends 

in Montenegro, the expected reduction has happened to the 

total amount of 24,3 without the debt reduction towards Italy 

with which negotiations are not over yet and which has not 

entered the total calculation of the liabilities to the Club. The 

reduction is expected to be 2-4 million EUR. 

Old or refinanced debts are also liabilities to Council of 

Europe Bank and to International Financial Corporation 

(IFC) and debt arrears to the Anglo Yugoslav Bank. Liabilities 

to Handlowy Bank are settled in total with the payment of the 

final instalment on 15th June 2006. 

Smaller share of long-term liabilities is related to the 

As shown on the previous table, in the structure of foreign 

public debt of Montenegro, at the end of June 2006, the 

biggest share has foreign refinanced debt to World bank - 

41,1% or 264,9 million EUR. 

Debt reduction when compared to 2005, to the absolute 

amount was caused by two reasons: 

1. From the 1st January 2006 debt of the public enterprise 

Željeznica Crne Gore is calculated as public debt since by the 

indebtedness after 2001, when Montenegro as a part of SRY, 

and State Union Serbia and Source: Montenegro Ministry regulated of Finance its membership 

and relations with international financial institutions 

and made new arrangements. New concluded, and at the 

same time withdrawn, foreign loans until 31.06.2006 amount 

71,9 million EUR. These loans include indebtedness in: 

European Investment Bank, European Community and 

German Bank for Reconstruction. The total amount of debt to 

European Bank for Reconstruction and Development based 

on the indebtedness for advisor in the privatisation of the 

38



Kombinat Aluminijuma Podgorica, was settled after successful 

process of privatisation of this company. 

2. INTERNAL PUBLIC DEBT 

Internal public debt of Montenegro consists of liabilities 

based on old foreign currency savings, liabilities based on 

credits taken from domestic financial and other institutions, 

liabilities based on the issue of short-term treasury bills, debt 

of local self-governments and payment arrears from the 

budget. 

Table 3. Structure and amount of internal public debt. 

the country, from 30% to 50% indicates the medium indebtedness 

of the country, having in mind that Montenegro with 

21,1% belongs to less indebted countries, and share of over 

50% the high indebtedness of the country. Just for comparison, 

at the end of 2004, with certain number of countries in 

the process of transition this indicator was: Bulgaria 57,6%; 

Czech Republic 37,4%; Croatia 79,9%; Lithuania 43,2%; 

Hungary 59,0%; Romania 39,8%; Slovenia 50,1%. 

When compared to the gross domestic product anticipated 

for 2006, gross public debt of Montenegro at the end of 

2006, amounts 36,6%. This is "significantly" lower from the 

defined fiscal criterion, of the maximum allowed public debt, 

of the European Union, which makes the Montenegro meet 

one of two Maastricht criteria which proscribe that the total 

debt should not cross 60% of the gross domestic product. 

In the indebtedness structure is noticeable the indebtedness 

reduction based on treasury bills and almost total 

elimination of the debt based on bank credits so that the 

indebtedness based on treasury bills amounted 6,5 million 

EUR. Until 30th June 2006, about 3 million EUR of old foreign 

currency savings bonds have been paid. Also, there has 

been a significant further reduction of liabilities based on 

outstanding budgetary payments for 15,2 million EUR. To 

the total amount, domestic debt in first two quarters of 2006, 

was lower for 19,4 million EUR when compared to 

31.12.2005. 

This indicator is considered to be the most important indicator 

of the debt sustainability. 

According to value of mentioned indicators, Montenegro 

is ranked in countries with low indebtedness with tendency 

of further improvement. 

5. INDICATORS FOR 

INDEBTEDNESS OF 

MONTENEGRO- FINAL 

OBSERVATIONS 

According to the methodology of World Bank (Debt 

Reporting System) share of foreign debt in the gross domestic 

product lower than 30% indicates the low indebtedness of 

DEBT AND CASH MANAGEMENT DEPARTMENT 

SNEŽANA IVANOVIĆ, MERSIJA PURIŠIĆ, 

MINA JOVOVIĆ, M.A. NIKOLA VUKIĆEVIĆ 

3 - According to the projection of the Deutsche Bank Research 

39

Macroeconomic Analysis 


REPORT ON MACROFISCAL 

DEVELOPMENTS FOR THE FIRST 

FIVE MONTHS 2006 

Macroeconomic Analysis and International Co-Operation Department 

STANKO JEKNIĆ, PhD, Co-ordinator 

VLADISLAV KARADžIĆ, Senior Advisor I 

INTRODUCTION 

Assessment of the public spending of the Republic of Montenegro for 2006 is based on the data on GDP developments, 

including data on public spending developments in the period from 2001-2006. Public spending policy for 2006 is based on 

assessment of Montenegro's fiscal potential and macroeconomic trends defined under the Montenegro's Economic Reform 

Agenda of April 2005. In accordance with the economic policy goals and objectives defined under the Economic Reforms 

Agenda, 2006 Budget will be further balances, with relative cut in deficit as a share in GDP. Basic fiscal policy parameters will 

also be adjusted to the frameworks and objectives agreed with the IMF and World Bank. They will also be harmonized with the 

EU Directives. 

Assessment of the Budget revenues for 2006 is based on projected data on GDP developments, including data on Budget 

revenues developments in the period from 2001-2006. Macroeconomic indicators projection under the Montenegro's 

Economic Reforms Agenda indicates that 2006 GDP will amount 1.759 mil. eur (current prices), while the real growth rate 

will be 4,5 %. 

Data on GDP are taken from analysis prepared by the IMF and the Ministry of Finance. According to the data, GDP growth 

and average annual rate show a stabile economic growth trend in the period from 2003. Projections indicate that GDP will amount 

1.794,00 mil.eur in 2006, while the nominal growth rate will be 7%. 

40



Projected GDP influenced assessment of the total pubic spending in Montenegro for 2006. Public spending level and its relative 

share in GDP are given in the Table below: 

Relative cut in public spending share in GDP will be ensured 

with a slower growth of Government Budget spending and volume 

of health protection than GDP growth. Economic Reforms 

Agenda provides for that 2006 public spending share in 

GDP will be by 43%. However, 2006 projections show relative 

public spending share in GDP by 44,21%, which is not in line 

with the objectives set under the Agenda. This deviation comes 

from unreal planning of local governments' spending for 2005 

and 2006. When 20 mil eur is deducted from underestimated local 

government spending, consolidated public spending amounts 

43% of GDP, which is in accordance with the Agenda. 

I CONSOLIDATED PUBLIC SPENDING 

Public spending analysis for 2006 was conducted on the basis of preliminary data disclosed under the financial statements 

of the Government Budget, extra-budgetary funds and local governments. The financial statements were produced on the basis 

of cash flow statements and were systematized in a single form with a view to providing an objective methodological approach 

in tabular presentations and analysis of the public spending system functioning in 2006. 

2006 public spending is based on economic policy goals for 2006, projecting employment rate growth, companies' restructuring 

and privatization, poverty reduction and real growth of living standards, while main objectives of public spending are aimed 

at increase in Budget revenues, rationalization of Government Budget and HIF spending as well as intensifying the reforms 

in the field of judiciary, education and public administration. 

1. PLAN AND REALIZATION OF PUBLIC SPENDING FOR THE PERIOD JANUARY-MAY 2006 

Public revenues in this period were realized to the 

amount of 322,19 mil.eur, which is by 16,08 mil.eur more 

than planned for the said period. Tax collection was higher 

by 24,78 mil eur than planned, primarily due to a more 

efficient collection of VAT and corporate income tax 

than planned. Collection of fees, charges and contributions 

has been slightly increased as compared to the 

planned, while other revenues have been significantly 

decreased. The reason for such decrease lies in a much 

poorer collection of outstanding tax liabilities from the 

previous period - only 20% than planned. 

41



Public expenditures were executed to the amount of 

334,35 mil.eur, which is by 52,23 mil.eur less than planned 

for the period January - May 2006. Lower salary disbursements 

than planned are result of an average duration 

of salaries disbursement of about 5 days, so realization 

of a part of the plan is transferred from the current 

month into the following month. Lower realization of expenditures 

for material and capital expenditures is a result 

of a change in the structure of disbursements from 

the Republic Budget, which were in the first five months 

earmarked for repayment of outstanding liabilities by 

9,64 mil eur more than as was planned for the five 

months. 

Public spending deficit for the period January-May 

2006 amounts 12,8 mil.eur, out of which Pension and Disability 

Insurance Fund accounts for 0,96 mil.eur , Budget 

13,44 mil. eur, Employment Agency 2,75 mil.eur and 

local self-government 0,29 mil.eur. At the same time, HIF 

surplus amounted 4,64 mil.eur, so that consolidated deficit 

in the period January-May 2006 amounts 12,8 mil. eur, 

accounting for 0,71 % of GDP. Public spending deficit 

was financed from the privatization receipts, foreign credits 

and donations. At the same time 14,91 mil eur of deposit 

was drawn, resulting in repayment of domestic credit 

liabilities to the amount of 6,5 mil eur. 

Salaries and other earnings were decreased 

by 0,33 mil.eur as compared to 

the plan, and their realization is estimated 

to be 99,89 % of the plan for 2006. 

Current expenditures were reduced 

by 0,12 mil.eur and were projected 

to amount 465,53 mil.eur. 

All public expenditures are mostly 

as planned, except for repayment of 

outstanding liabilities, which was 

increased by 12,5 mil euros, thanks to 

better collection of public source revenues. 

42



II BUDGET OF THE REPUBLIC OF MONTENEGRO 

1. PLAN AND REALIZATION OF THE BUDGET OF THE REPUBLIC OF MONTENEGRO FOR THE PERIOD JANUARY- 

MAY 2006 

Source revenues were realized to the amount of 195,4mil.eur, while total expenditures were executed to the amount of 208,8 

mil.eur. Current and capital expenditures with net loans and repayment of guarantees were executed to the amount of 217 

mil.eur, while59 mil.eur was disbursed by transfers to the Funds and local self-government. Budget spending is less than planned 

by 13% in the period January-May 2006. Lower disbursements for salaries than planned are result of average duration of salary 

disbursements of about 5 days, so realization of a part of the plan is transferred from current month into next month. Lower 

realization of expenditures for material and capital expenditures is a result of a change in the dynamics of required spending, 

being less than planned, which influenced allocation of certain amount of available funds for repayment of outstanding 

liabilities to the amount of 26,3 mil.eur. 

Source revenues of the Republic Budget for the first five months 2006 were realized to the amount of 195,4 mil.eur or by 

11,5 % more than planned for the same period. Positive trends were particularly realized with respect to the following types of 

revenues: 

• Corporate income tax, the realization of which is : 

- Higher by 33,8% as compared to the plan for the first five months 2006 

• Value added tax, the realization of which is: 

- Higher by 30,7% as compared to the plan for the first five months 2006 

43



Expenditures of the Republic Budget for the period January-May 2006 were executed to the amount of 208,8 mil.eur, which 

accounts for 87 % of total planned expenditures for the said period. For current and capital expenditures with net loans, 217 

mil.eur was disbursed, while59 mil.eur was disbursed by transfers to the Funds and local self-government,. 

Lower level of disbursements on account of planned expenditures for the first five months 2006 had no influence on increase 

in outstanding liabilities, indicating that spending units, while planning monthly spending decided on a higher level of 

spending in the first and second quarter 2006. Real lower level of spending, particularly with respect to capital expenditures, allowed 

repayment of credit and outstanding liabilities from previous years on account of less disbursed amounts for current and 

capital expenditures 

III PENSION AND DISABILITY INSURANCE FUND (PIO FUND) 

From the PIO Fund, for the period January-May 2006, funds for pension disbursement were provided to the amount of 

62,50 mil.eur. 

Pension amounts are adjusted from the semi-annual amount based on the statistic data on cost of living and average earnings 

of employees from the previous semi-annual period. Increase in number of pensioners is planned to decline in 2007, 

as a result of enforcement of a new Law on Pension and Disability Insurance, which can be seen based on data on average number 

of pensioners in 2005 (93.033) and average number of pensioners for the period from January-May 2006 (92.159) 

1. PLAN AND REALIZATION OF THE FUND PIO BUDGET 

FOR THE PERIOD FROM JANUARY-MAY 2006 

Current revenues of the Fund PIO were realized to the amount of 49,84 mil.eur and are lower than planned by 2,60 %. Transfers 

from the Republic Budget were realized to the amount of 20,44 mil.eur and were executed 68,4 % as compared to the plan. 

Total spending of the Fund PIO for the period January-May 2006 amounted 71,24 mil.eur, being less than planned by 11 %. 

Lower level of the Fund PIO spending is a result of lower execution of liabilities to the Pensioners Health Insurance Fund. In 

this period, surplus of the Fund PIO is planned to amount 4,00 mil eur. However, due to lower realization of transfers, it amounts 

1,00 mil eur. 

The Table below shows realization of the receipts and execution of the Fund PIO budget for the first five months 2006, including 

deficit and financing: 

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IV REPUBLIC HEALTH INSURANCE FUND (HIF) 

1. PLAN AND REALIZATION OF THE HIF BUDGET FOR THE PERIOD JANUARY-MAY 2006 

Current revenues of the Health Insurance Fund were realized to the amount of 38,45 mil. eur, which is by 18,75 % more than 

planned. Revenues from contributions amount 35,71 mil. eur and are higher than planned by 11,76 %, while received transfers 

amount 9,2 mil. eur, and are less than planned by 5,7 mil.eur. In the first five months, less than 3,52 mil.eur was transferred from 

the Republic Budget, and 5,7 mil.eur from the PIO Fund. From the Period January-May, the HIF realized a surplus to the amount 

of 4,66 mil eur , increasing a deposit to 2,87 mil eur and net domestic debt repayment to the amount of 1,78 mil eur. 

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V EMPLOYMENT AGENCY OF MONTENEGRO 

1. PLAN AND REALIZATION OF THE EMPLOYMENT AGENCY BUDGET FOR THE PERIOD JANUARY-MAY 2006 

Employment agency of Montenegro have realized current revenues to the amount of 5,95 mil. eur, which is by 30% more 

than planned. Revenues from contributions amount 2,06 mil. eur and are less than planned by 6,5 %, other revenues amount 

2,36 mil.eur and are higher than planned by 2,4 mil.eur. Received transfers amount 2,32 mil. eur and are in line with the plan.. 

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Projected expenditures of the Agency for the period January - May amounted 6,16 mil.eur, and were executed to the amount 

of 11,03 mil.eur, which is by 4,84 mil.eur more than planned for the said period. Deficit was realized to the amount of 2,75 mil.eur, 

which was financed from the privatization receipts to the amount of 1,1mil.eur , while the deposit was reduced by 1,6 mil eur. 

VI LOCAL SELF-GOVERNMENT 

1. PLAN AND REALIZATION OF THE LOCAL SELF-GOVERNMENT BUDGET FOR THE PERIOD JANUARY-MAY 2006 

Municipal revenues for the period January - May 2006 were projected to amount 39,72 mil.eur, out of which source revenues 

account for 38,87 mil.eur, Republic Budget transfers amount 0,85mil.eur, and the revenues in this period were realized to the 

amount of 33,8 mil.eur. 

Expenditures were projected to amount 39,2mil.eur, and were executed to the amount of 33,49 mil.eur. Realized deficit of 

the local self government for the period January-May amounts 0,29 mil. eur. 

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Bulletin - Vlada Crne Gore

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