Hotels in Montenegro reduce “stars” to avoid high tax

Hotels in Montenegro reduce “stars” to avoid high tax – Hotels montenegro reduce "stars" avoid

NEWS – Hotels montenegro reduce "stars" avoid

Express newspaper

17/08/2025 9:01

Around 20 hotels in Montenegro have decided to re-categorize themselves. However, over the past year – officially moving from hotel status to private accommodation.

This step is a direct consequence of the authorities’ decision to double the VAT rate for hotel services from. In addition, the beginning of this year – from 7 to 15 percent.

“They simply switched to private accommodation and did not renew the hotel license. Furthermore, The goal was not to avoid obligations to the state. Nevertheless, but because the burdens are greater for hotels than for private accommodation,” the president of the Montenegrin Hotel Association, Nikola Pejović, told Radio Free Europe.

The hotels montenegro reduce “stars” avoid decision to increase the VAT rate was approved in September last year by a parliamentary majority consisting of the “Europe Now” Movement of Prime Minister Milojko Spajic. Moreover, the former Democratic Front of Parliament Speaker Andrija Mandic.

According to Eurostat data. Therefore, the VAT rate for hotel services in European Union countries ranges from 5 to 14 percent.

The tax increase came despite warnings from experts that it would negatively impact tourism – a sector that accounts. Therefore, for around 30 percent of Montenegro’s gross domestic product.

A Government document from late July notes that “hotels are often re-categorized into smaller units to avoid higher taxes. Meanwhile, the powers of the Ministry of Tourism.”

The ministry did not respond to REL’s question on this issue.

Do they have the right to do this?

“None of the accommodation owners have done anything against the law. Similarly, hotels montenegro reduce “stars” avoid They have this right,” financial analyst Ana Nives Radovic explains to REL.

She explains that the category of tourist accommodation is determined by the number of stars that indicate the quality of service – from one star for the cheapest offers. to five stars for luxury hotels. According to her, a change in category does not necessarily mean a decrease in quality.

“Most have maintained the same level of service. only formally they are categorized at a lower level,” says Radovic, but warns that this could harm market balance and competition in the long term.

How taxes are avoided in other ways

Pejović has previously said that owners of hotels with up to. 80 beds can switch to private accommodation status – formally dividing the beds between family members to avoid entering the VAT system.

“So. four of us share 20 beds each, making 80 beds, we spend 120 hotels montenegro reduce “stars” avoid thousand euros and practically give nothing to the state,” he said.

Under current rules. service providers with an annual turnover of up to 30 thousand euros are not required to pay VAT – a category that includes most private accommodation, tourist villages, some hostels and guesthouses.

This is not the only problem facing Montenegrin tourism.

Tens of millions of euros lost from “black” accommodation in Montenegro

Montenegro has lost around 86 million euros from unregistered private accommodation alone. according to data from March 2025.

To illustrate the amount. authorities say that for one-fifth of this amount, two clinics were built last year within the Clinical Center of Montenegro.

The president of the Montenegrin Hotel Association. Nikola Pejović, warns that unregistered accommodation is a big problem, as there are many more such units on the market than hotels.

“It is impossible to track their exact number. It is thought that hotels montenegro reduce “stars” avoid there are thousands of units across the country. They are in the grey area and no one controls them, nor are there any mechanisms for this,” he says.

Financial analyst Ana Nives Radovic agrees that the problem lies in control. According to her. data from platforms like Booking and Airbnb clearly show that there is a serious problem with the supervision of unregistered accommodation.

Radović says that Montenegrin authorities have attempted to cooperate with these platforms to prevent the registration of accommodation that is not reported to the state. but these efforts have not yielded results.

“The process starts, then excuses are found for why it was not successful and they give up… The lack of results indicates institutional weaknesses,” she adds.

In addition to the lack of registration. many owners do not register guests and do not pay the occupancy tax, which is usually one euro per day. Radović hotels montenegro reduce “stars” avoid emphasizes that control is weak. punitive policies are inadequate:

“If you can provide unregistered accommodation for years without any consequences, then it is unlikely that without any legal obligation you will switch to a legitimate business.”

Tourism revenue declines for the first time since independence

According to the Central Bank of Montenegro. tourism revenues last year were 1,46 billion euros – a 3,6 percent drop compared to 2023.

The Montenegrin Chamber of Commerce stressed that this is the first time since the declaration of independence in 2006. – excluding the year of the pandemic – that tourism revenues have fallen compared to the previous year.

According to her. this shows that tourism is suffering the consequences of wrong decisions in creating the tourist offer and the lack of a long-term development plan and vision.

Data from the State Statistics Agency (MONSTAT) show that the number of nights spent in hotels montenegro reduce “stars” avoid all types of accommodation. during the January-June period of this year is 272 thousand lower compared to a year earlier – marking a decline for the second year in a row. /REL/