The France-Montenegro tax treaty: the 1974 agreement concluded with Yugoslavia

There is no tax treaty specific to Montenegro. Tax relations with France are governed by the Franco-Yugoslav Convention of March 28, 1974, which the French tax authorities indicate is applicable to Montenegro. This convention only covers income tax. It caps dividends at 5 or 15 13% of the value of dividends and reserves interest and royalties for the beneficiary state.

A 1974 convention that continues to apply

The convention was signed in Paris on March 28, 1974, with the Socialist Federal Republic of Yugoslavia. It entered into force on August 1, 1975. An agreement of March 26, 2003, between France and Serbia and Montenegro, concerning the succession of bilateral treaties, stipulates that it continues to have effect in their relations. The administrative commentary (BOI-INT-CVB-MNE, version of September 12, 2012) specifies that this applies to relations between France and the Republic of Montenegro. The text read refers to Yugoslavia; the interpretation for Montenegro is based on this commentary.

Maximum deductions and key rules

Interest and royalties: no rate, only one state

This convention does not specify any percentages for interest or royalties. For interest, the source state does not tax it unless the recipient has a permanent establishment there to which the claim is effectively connected (Article 11, paragraph 3). For royalties, Article 12, paragraph 3 refers to the permanent establishment and, for a liberal profession, the fixed base.

Residence and tie-breaking

Article 4 defines a resident as someone subject to taxation by virtue of their domicile, residence, or place of management. For an individual resident in both states: permanent home, center of vital interests, habitual residence, nationality, and then approval by the competent authorities. For a company, the place of effective management is the determining factor.

In France: exemption with effective rate

Article 23 provides France with an exemption on income taxable in Yugoslavia, rather than a general tax credit. A credit equal to the Yugoslav tax, up to the limit of the corresponding French tax, applies to dividends, directors' fees, and the remuneration of artists and athletes (Articles 10, 16, and 17). A progressive tax clause allows the exempting state to calculate its tax at the rate corresponding to the total income.

Dividends of €100,000: typical case (fictitious profile)

Situation. A French company, fictitious profile, directly owns 25 % of the capital of a Montenegrin company and receives €100,000 in gross dividends.

Issue. She wants to know the maximum tax that Montenegro can withhold at source according to the text.

Strategy. It applies Article 10 § 2 and verifies the threshold of 25 % and the direct nature of the possession.

Result. The ceiling is €5,000 (5 %), compared to €15,000 if the condition were not met: a difference of €10,000. This figure is a maximum, not the tax due.

What this page does not cover

The application over time, denunciation, articles on royalties and artists, the exchange of information, Montenegrin taxes, and domestic tax rates are not detailed. The administrative list classifies the convention among those concerning income tax; wealth and inheritance are not addressed.

What changes depending on your situation

• Your residence as defined in the agreement.
• The nature of the income: dividend, interest, royalty, gain, salary, pension.
• The percentage of capital held and its direct nature.
• The days spent in each state during the fiscal year.

An article should be read in light of the facts in your case, and no result is guaranteed in advance.