By adopting the new Law on Corporate Profit Tax, Montenegro included the obligation to prepare and submit a transfer pricing study. A transfer price is the price incurred in connection with asset transactions or the creation of obligations between related parties. Transfer pricing documentation is required to be prepared by entities that perform transactions with related parties (intercompany transactions) during the year. TP documentation must be prepared annually in case there are intercompany transactions in the relevant business year.
Deadlines for submission or delivery of documentation on transfer prices are determined based on the classification of companies according to accounting law. According to this, classification is on:
- Large taxpayers, classified in accordance with the regulation regulating the criteria for determining large taxpayers, who carry out transactions with related parties, are required to submit documentation on transfer prices, on the basis of which it can be determined, when submitting the income tax return whether the terms of the transaction with related parties are in accordance with the "arm's length" principle. Bearing in mind that the deadline for submitting profit tax returns is March 31st for the previous year, the deadline for submitting documentation on transfer prices is also March 31st for the previous year.
- The taxpayer, who does not have the status of a large taxpayer, is obliged to have the documentation for transfer prices when submitting the income tax return and to submit it at the request of the competent tax authority within 45 days from the date of receipt of the request. This law also provides that the taxpayer can have documentation in abbreviated form if transactions with related parties do not exceed the value of 75,000 euros in the year for which the tax return is submitted. Until 2027, the taxpayer is required to have transfer pricing documentation for the previous year by June 30 of the current year.
Also, the new Law on Corporate Profit Tax regulates other items related to transfer prices:
- the term "related parties" is defined in more detail,
- all five OECD methods for checking transfer prices are introduced, with the possibility of applying other methods that are not explicitly mentioned and a combination of all methods
- The publication of "out of reach" interest rates for loans and other financial instruments is foreseen
The Ministry of Finance of Montenegro will prescribe a closer method of determining transfer prices and the content of documentation, all in accordance with OECD Guidelines and other international organizations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.